1.Short
title; amendment of 1986 Code; table of contents
(a)This Act may be cited
as the Tax Relief Act of
2005
.
(b)Except as otherwise expressly provided, whenever in
this Act an amendment or repeal is expressed in terms of an amendment to, or
repeal of, a section or other provision, the reference shall be considered to
be made to a section or other provision of the Internal Revenue Code of
1986.
(c)The table of contents for this Act is as follows:
Sec. 1. Short title; amendment
of 1986 Code; table of contents.
TITLE I—Tax benefits for areas affected by Hurricanes Katrina,
Rita, and Wilma
Subtitle A—Gulf Opportunity Zone benefits
Sec. 101. Gulf Opportunity Zone benefits.
Sec. 102. Expansion of Hope Scholarship and Lifetime Learning
Credit for students in the Gulf Opportunity Zone.
Sec. 103. Extension of special rules for mortgage revenue
bonds.
Subtitle B—Tax benefits related to Hurricanes Rita and
Wilma
Sec. 111. Extension of certain emergency tax relief for
Hurricane Katrina to Hurricanes Rita and Wilma.
TITLE II—Extension of expiring provisions
Subtitle A—Multi-year extensions
Sec. 201. Extension of increased expensing for small
business.
Sec. 202. Credit for elective deferrals and IRA
contributions.
Sec. 203. Above-the-line deduction for higher
education.
Sec. 204. Extension and modification of new markets tax
credit.
Subtitle B—One-year extensions
Sec. 211. Election to deduct State and local general sales
taxes.
Sec. 212. Extension of alternative minimum tax exemption amount
for individuals.
Sec. 213. Allowance of nonrefundable personal credits against
regular and alternative minimum tax liability.
Sec. 214. Extension and modification of research
credit.
Sec. 215. Work Opportunity Tax credit and Welfare-to-Work
credit.
Sec. 216. Qualified zone academy bonds.
Sec. 217. Deduction for corporate donations of computer
technology and equipment.
Sec. 218. Above-the-line deduction for certain expenses of
elementary and secondary school teachers.
Sec. 219. Expensing of brownfields remediation
costs.
Sec. 220. Tax incentives for investment in the District of
Columbia.
Sec. 221. Indian employment tax credit.
Sec. 222. Accelerated depreciation for business property on
Indian reservation.
Sec. 223. Fifteen-year straight-line cost recovery for
qualified leasehold improvements and qualified restaurant
improvements.
Subtitle C—Application of EGTRRA sunset
Sec. 231. Application of EGTRRA sunset to this
title.
TITLE III—Provisions relating to charitable donations
Subtitle A—Charitable giving incentives
Sec. 301. Charitable deduction for nonitemizers.
Sec. 302. Tax-free distributions from individual retirement
plans for charitable purposes.
Sec. 303. Modification of charitable deduction for
contributions of food inventory.
Sec. 304. Basis adjustment to stock of S corporation
contributing property.
Sec. 305. Modification of charitable deduction for
contributions of book inventory.
Sec. 306. Modification of tax treatment of certain payments to
controlling exempt organizations and public disclosure of information relating
to unrelated business income.
Subtitle B—Reforming charitable organizations
Part I—General reforms
Sec. 311. Tax involvement by exempt organizations in tax
shelter transactions.
Sec. 312. Excise tax on certain acquisitions of interests in
insurance contracts in which certain exempt organizations hold an
interest.
Sec. 313. Increase in penalty excise taxes on public charities,
social welfare organizations, and private foundations.
Sec. 314. Reform of charitable contributions of certain
easements on buildings in registered historic districts.
Sec. 315. Charitable contributions of taxidermy
property.
Sec. 316. Recapture of tax benefit for charitable contributions
of exempt use property not used for an exempt use.
Sec. 317. Limitation of deduction for charitable contributions
of clothing and household items.
Sec. 318. Modification of substantiation and recordkeeping
requirements for certain charitable contributions.
Sec. 319. Contributions of fractional interests in tangible
personal property.
Sec. 320. Provisions relating to substantial and gross
overstatements of valuations of charitable deduction property.
Sec. 321. Additional standards for credit counseling
organizations.
Part II—Improved accountability of donor advised funds
Sec. 331. Excise tax on sponsoring organizations of donor
advised funds for failure to meet distribution requirements.
Sec. 332. Prohibited transactions.
Sec. 333. Treatment of charitable contribution deductions to
donor advised funds.
Sec. 334. Returns of, and applications for recognition by,
sponsoring organizations.
Part III—Improved accountability of supporting
organizations
Sec. 341. Requirements for supporting
organizations.
Sec. 342. Excise tax on supporting organizations for failure to
meet distribution requirements.
Sec. 343. Excess benefit transactions.
Sec. 344. Excess business holdings of supporting
organizations.
Sec. 345. Treatment of amounts paid to supporting organizations
by private foundations.
Sec. 346. Returns of supporting organizations.
TITLE IV—Miscellaneous provisions
Sec. 401. Restructuring of New York Liberty Zone tax
credits.
Sec. 402. Modification to S corporation passive investment
income rules.
Sec. 403. Modification of effective date of disregard of
certain capital expenditures for purposes of qualified small issue
bonds.
Sec. 404. Premiums for mortgage insurance.
TITLE V—Revenue offset provisions
Subtitle A—Provisions designed to curtail tax
shelters
Sec. 501. Understatement of taxpayer’s liability by income tax
return preparer.
Sec. 502. Modifications of suspension of interest and penalties
where Internal Revenue Service fails to contact taxpayer.
Sec. 503. Frivolous tax submissions.
Subtitle B—Economic substance doctrine
Sec. 511. Clarification of economic substance
doctrine.
Sec. 512. Penalty for understatements attributable to
transactions lacking economic substance, etc.
Sec. 513. Denial of deduction for interest on underpayments
attributable to noneconomic substance transactions.
Subtitle C—Improvements in efficiency and safeguards in
Internal Revenue Service collection
Sec. 521. Waiver of user fee for installment agreements using
automated withdrawals.
Sec. 522. Termination of installment agreements.
Sec. 523. Partial payments required with submission of
offers-in-compromise.
Subtitle D—Penalties and fines
Sec. 531. Increase in criminal monetary penalty limitation for
the underpayment or overpayment of tax due to fraud.
Sec. 532. Doubling of certain penalties, fines, and interest on
underpayments related to certain offshore financial arrangements.
Sec. 533. Denial of deduction for certain fines, penalties, and
other amounts.
Sec. 534. Denial of deduction for punitive damages.
Sec. 535. Increase in penalty for bad checks and money
orders.
Subtitle E—Provisions to discourage expatriation
Sec. 541. Tax treatment of inverted entities.
Sec. 542. Revision of tax rules on expatriation of
individuals.
Subtitle F—Miscellaneous provisions
Sec. 551. Treatment of contingent payment convertible debt
instruments.
Sec. 552. Grant of Treasury regulatory authority to address
foreign tax credit transactions involving inappropriate separation of foreign
taxes from related foreign income.
Sec. 553. Repeal of special property exception to leasing
provisions of the American Jobs Creation Act of 2004.
Sec. 554. Application of earnings stripping rules to partners
which are corporations.
Sec. 555. Limitation of employer deduction for certain
entertainment expenses.
Sec. 556. Increase in age of minor children whose unearned
income is taxed as if parent’s income.
Sec. 557. Loan and redemption requirements on pooled financing
requirements.
Sec. 558. Reporting of interest on tax-exempt
bonds.
Sec. 559. Modification of credit for producing fuel from a
nonconventional source.
Sec. 560. Modification of individual estimated tax safe
harbor.
Sec. 561. Revaluation of LIFO inventories of large integrated
oil companies.
Sec. 562. Elimination of amortization of geological and
geophysical expenditures for major integrated oil companies.
<enum>I</enum><header>Tax
benefits for areas affected by Hurricanes Katrina, Rita, and Wilma</header>
<subtitle id="idBDE8D255C8B84627AFFEE81A84541034"><enum>A</enum><header>Gulf Opportunity
Zone benefits</header>
<section id="idDDFD7AD9E9814958AB4ECA1E34262038"><enum>101.</enum><header>Gulf
Opportunity Zone benefits</header>
<subsection commented="no" display-inline="no-display-inline" id="id145FB56C8AE34E84BAC78388694FDDF1"><enum>(a)</enum><header>In
general</header><text>Chapter 1 is amended by adding at the end the following
new subchapter:</text>
<quoted-block id="IDC387A01F306847CBA2563F563E133E9B">
<subchapter id="ID6B95FA538268480C95A6F9821722837F"><enum>Z</enum><header>Hurricane relief
benefits</header>
<toc regeneration="no-regeneration">
<toc-entry level="section">Sec. 1400N. Definitions.</toc-entry>
<toc-entry bold="off" level="section">Sec. 1400O. Tax benefits for
Gulf Opportunity Zone.</toc-entry>
</toc>
<section id="idDC1C632FA575462292B16D29AA11DA12"><enum>1400N.</enum><header>Definitions</header><text display-inline="no-display-inline">For purposes of this subchapter—</text>
<paragraph id="idC5A3D1C320C746EDB5E5D54E35094E21"><enum>(1)</enum><header>Gulf
Opportunity Zone</header><text display-inline="yes-display-inline">The term
<term>Gulf Opportunity Zone</term> or <term>GO Zone</term> means that portion
of the Hurricane Katrina disaster area determined by the President to warrant
individual or individual and public assistance from the Federal Government
under the Robert T. Stafford Disaster Relief and Emergency Assistance Act by
reason of Hurricane Katrina.</text>
</paragraph><paragraph id="id6C64262B0B40431E99DC9B681017257B"><enum>(2)</enum><header>Hurricane
Katrina disaster area</header><text>The term <term>Hurricane Katrina disaster
area</term> means an area with respect to which a major disaster has been
declared by the President before September 14, 2005, under section 401 of such
Act by reason of Hurricane Katrina.</text>
</paragraph><paragraph commented="no" id="id9FA0DA8C354F45C29FD3CF93ACBABAA3"><enum>(3)</enum><header>Rita GO
Zone</header><text>The term <term>Rita GO Zone</term> means that portion of the
Hurricane Rita disaster area determined by the President to warrant individual
or individual and public assistance from the Federal Government under such Act
by reason of Hurricane Rita.</text>
</paragraph><paragraph commented="no" id="idDBD81A565FA24B97AB6D23BAF2BB9917"><enum>(4)</enum><header>Hurricane Rita
disaster area</header><text>The term <term>Hurricane Rita disaster area</term>
means an area with respect to which a major disaster has been declared by the
President before October 6, 2005, under section 401 of such Act by reason of
Hurricane Rita.</text>
</paragraph><paragraph commented="no" id="id8A09AA48570648FF8334987BF877E61B"><enum>(5)</enum><header>Wilma GO
Zone</header><text>The term <term>Wilma GO Zone</term> means that portion of
the Hurricane Wilma disaster area determined by the President to warrant
individual or individual and public assistance from the Federal Government
under such Act by reason of Hurricane Wilma.</text>
</paragraph><paragraph commented="no" display-inline="no-display-inline" id="idE1921C35F3744AA0AAEA98298B8F7B1A"><enum>(6)</enum><header>Hurricane Wilma
disaster area</header><text>The term <term>Hurricane Wilma disaster area</term>
means an area with respect to which a major disaster has been declared by the
President before October 25, 2005, under section 401 of such Act by reason of
Hurricane Wilma.</text>
</paragraph></section><section id="ID1CA09AA37DBF458691EF0DCD90A04ED4"><enum>1400O.</enum><header>Tax benefits
for Gulf Opportunity Zone</header>
<subsection id="IDA1124290905444BF8C51D74E9E3DE0FA"><enum>(a)</enum><header>Special
allowance for certain property acquired after August 27, 2005</header>
<paragraph id="IDD55440EC1DF943D58F300E3BB0CBDF1B"><enum>(1)</enum><header>Additional
allowance</header><text>In the case of any qualified Gulf Opportunity Zone
property—</text>
<subparagraph id="IDCDA19FD4F53944489FCE9945777A5761"><enum>(A)</enum><text>the depreciation
deduction provided by section 167(a) for the taxable year in which such
property is placed in service shall include an allowance equal to 50 percent of
the adjusted basis of such property, and</text>
</subparagraph><subparagraph id="IDA92F90B08664474B8AA283B5D741FCE0"><enum>(B)</enum><text>the adjusted
basis of the qualified Gulf Opportunity Zone property shall be reduced by the
amount of such deduction before computing the amount otherwise allowable as a
depreciation deduction under this chapter for such taxable year and any
subsequent taxable year.</text>
</subparagraph></paragraph><paragraph id="ID1DEE7EFF0C5D42F8A4A54FAC05C8F355"><enum>(2)</enum><header>Qualified Gulf
Opportunity Zone property</header><text>For purposes of this subsection—</text>
<subparagraph id="ID9D396383803C41F9AD7D09C3C762D98E"><enum>(A)</enum><header>In
general</header><text>The term <term>qualified Gulf Opportunity Zone
property</term> means property—</text>
<clause id="ID8390343170CE4DB484ACB46DEDDAB405"><enum>(i)</enum><subclause commented="no" display-inline="yes-display-inline" id="IDF24F9D4EA44047EF9A3EB16908915703"><enum>(I)</enum><text>which is described in
section 168(k)(2)(A)(i), or</text>
</subclause><subclause id="IDA77B71F9A1A349F2881FD2D78B9C6B73" indent="up1"><enum>(II)</enum><text>which is nonresidential real property or
residential rental property,</text>
</subclause></clause><clause id="IDE6F520E8EAC14EF1B3F5DF2A4EC4DCBB"><enum>(ii)</enum><text>substantially
all of the use of which is in the Gulf Opportunity Zone and is in the active
conduct of a trade or business by the taxpayer in such Zone,</text>
</clause><clause id="IDD84F5AEA1A114302A63E0144C59BC0BD"><enum>(iii)</enum><text>the original
use of which in the Gulf Opportunity Zone commences with the taxpayer after
August 27, 2005,</text>
</clause><clause id="IDC0F8408F87344651ABB8C2AA9F5AB0E9"><enum>(iv)</enum><text>which is
acquired by the taxpayer by purchase (as defined in section 179(d)) after
August 27, 2005, but only if no written binding contract for the acquisition
was in effect before August 28, 2005, and</text>
</clause><clause id="IDD7186003B95440FAAC5E9468873E8261"><enum>(v)</enum><text>which is placed
in service by the taxpayer on or before the termination date.</text>
</clause><continuation-text continuation-text-level="subparagraph">The
term <quote>termination date</quote> means December 31, 2007 (December 31,
2008, in the case of nonresidential real property and residential rental
property).</continuation-text></subparagraph><subparagraph id="ID2BB5C3209C6E40BDA993FE4CE6566FC1"><enum>(B)</enum><header>Exceptions</header>
<clause id="IDF923C17521A6458C93164CEAA99A3EB1"><enum>(i)</enum><header>Alternative
depreciation property</header><text>The term <term>qualified Gulf Opportunity
Zone property</term> shall not include any property described in section
168(k)(2)(D)(i).</text>
</clause><clause id="H5756C309430D48A8934B2830CF183F97"><enum>(ii)</enum><header>Tax-exempt
bond-financed property</header><text display-inline="yes-display-inline">Such
term shall not include any property any portion of which is financed with the
proceeds of any obligation the interest on which is exempt from tax under
section 103.</text>
</clause><clause id="id46878E4273EC4579A148603934602909"><enum>(iii)</enum><header>Qualified
revitalization buildings</header><text display-inline="yes-display-inline">Such
term shall not include any qualified revitalization building with respect to
which the taxpayer has elected the application of paragraph (1) or (2) of
section 1400I(a).</text>
</clause><clause id="IDAA22E3B263154A8AA8BD5B20CADD67B4"><enum>(iv)</enum><header>Election
out</header><text>For purposes of this subsection, rules similar to the rules
of section 168(k)(2)(D)(iii) shall apply.</text>
</clause></subparagraph><subparagraph id="IDEECEC634034C4101B4B418B0240068F4"><enum>(C)</enum><header>Special
rules</header><text>For purposes of this subsection, rules similar to the rules
of section 168(k)(2)(E) shall apply, except that—</text>
<clause id="id240F45855ED7466E8F49E4908C7E518B"><enum>(i)</enum><text>clause (i)
thereof shall be applied by substituting <quote>after August 27, 2005, and
before the termination date (as defined in section 1400O(a)(2))</quote> for
<quote>after September 10, 2001, and before January 1, 2005</quote>,</text>
</clause><clause id="idCE09877F373945C0A360AECAA4D7AE4E"><enum>(ii)</enum><text>clauses (ii),
(iii), and (iv) thereof shall be applied by substituting <quote>August 27,
2005</quote> for <quote>September 10, 2001</quote> each place it appears,
and</text>
</clause><clause id="idAC864A7B0F994508BAB18123E96B53D3"><enum>(iii)</enum><text>clause (iv)
thereof shall be applied by substituting <quote>qualified Gulf Opportunity Zone
property</quote> for <quote>qualified property</quote>.</text>
</clause></subparagraph><subparagraph id="ID36ECBA5F7D3F419F91B65B9A80EA3878"><enum>(D)</enum><header>Allowance
against alternative minimum tax</header><text>For purposes of this subsection,
rules similar to the rules of section 168(k)(2)(G) shall apply.</text>
</subparagraph></paragraph><paragraph id="id6401241B38C744669FD4C3B80A987D18"><enum>(3)</enum><header>Recapture</header><text>For
purposes of this subsection, rules similar to the rules under section
179(d)(10) shall apply with respect to any qualified Gulf Opportunity Zone
property which ceases to be qualified Gulf Opportunity Zone property.</text>
</paragraph></subsection><subsection id="IDEC4B2C34591748F2B71848B72C9C68DD"><enum>(b)</enum><header>Increase in
expensing under section <enum-in-header>179</enum-in-header></header>
<paragraph id="ID6F35840E6AB044D5A38BE87787DDFCD5"><enum>(1)</enum><header>In
general</header><text>For purposes of section 179—</text>
<subparagraph id="IDF66FE9A24E4248748E4978B1BA14A7A2"><enum>(A)</enum><text>the $100,000
amount in section 179(b)(1) for the taxable year shall be increased by the
lesser of—</text>
<clause id="ID39F701A189D242A3A5CDD99B268EB64F"><enum>(i)</enum><text>$100,000,
or</text>
</clause><clause id="IDAB8D7FA9848A4130B48444B0162480C1"><enum>(ii)</enum><text>the cost of
section 179 property (as defined in section 179(d)) which is qualified Gulf
Opportunity Zone property placed in service during the taxable year, and</text>
</clause></subparagraph><subparagraph id="ID446A2DDC1A0148218F7CB87AC4FFFB0E"><enum>(B)</enum><text>the $400,000
amount in section 179(b)(2) for the taxable year shall be increased by the
lesser of—</text>
<clause id="id2B980B77EAB9448386C4194A38B70AA0"><enum>(i)</enum><text>$600,000,
or</text>
</clause><clause id="id700A1B3C80C444F68D639C9A0DAC6552"><enum>(ii)</enum><text>the cost of
section 179 property (as so defined) which is qualified Gulf Opportunity Zone
property placed in service during the taxable year.</text>
</clause></subparagraph></paragraph><paragraph id="IDAFA48AC82C614CF1B87A76154D927F1C"><enum>(2)</enum><header>Qualified Gulf
Opportunity Zone property</header><text>For purposes of this subsection, the
term <term>qualified Gulf Opportunity Zone property</term> has the meaning
given such term by subsection (a)(2).</text>
</paragraph><paragraph id="HF4CC9BFF92C54DF28847B835FAAB76E7"><enum>(3)</enum><header>Coordination
with empowerment zones and renewal communities</header><text>For purposes of
sections 1397A and 1400J, qualified Gulf Opportunity Zone property shall not be
treated as qualified zone property or qualified renewal property for any
taxable year, unless the taxpayer elects not to have this subsection apply to
all such qualified Gulf Opportunity Zone property placed in service by the
taxpayer during the taxable year.</text>
</paragraph><paragraph id="IDCC8F31758ABF46DCA5BDC663D1BBB446"><enum>(4)</enum><header>Recapture</header><text>Rules
similar to the rules under section 179(d)(10) shall apply with respect to any
qualified Gulf Opportunity Zone property which ceases to be Gulf Opportunity
Zone property.</text>
</paragraph></subsection><subsection id="ID4C36D6CC0D5242A8A94042AE263A6D2A"><enum>(c)</enum><header>Tax-exempt bond
financing</header>
<paragraph id="IDB33276E7547C44039E86ABFF78C8B43D"><enum>(1)</enum><header>In
general</header><text>For purposes of this title, any qualified Gulf
Opportunity Zone Bond shall be treated as a qualified bond.</text>
</paragraph><paragraph id="ID0D52A46E8F27450CB067DFC1484D9157"><enum>(2)</enum><header>Qualified Gulf
Opportunity Zone Bond</header><text>For purposes of this subsection, the term
<term>qualified Gulf Opportunity Zone Bond</term> means any bond issued as part
of an issue if—</text>
<subparagraph id="id190A2B19B8D54CC2AE059946AFCFF691"><enum>(A)</enum><text>except as
provided in paragraph (4), such bond meets the applicable requirements of part
IV of subchapter B of this chapter,</text>
</subparagraph><subparagraph id="ID330A00D23EA14AA4B9C66EB8CF3713E6"><enum>(B)</enum><text>such bond is
issued by the State of Alabama, Louisiana, or Mississippi (or any political
subdivision thereof),</text>
</subparagraph><subparagraph id="ID4E9414122B0649C38BEA7E1F661808AA"><enum>(C)</enum><text>the Governor of
such State designates such bond for purposes of this section, and</text>
</subparagraph><subparagraph id="ID26D7AEB1504A4B07B1D1432FD59619A1"><enum>(D)</enum><text>such bond is
issued after the date of the enactment of this section and before January 1,
2011.</text>
</subparagraph></paragraph><paragraph id="ID16464662F30A4856874DB8202BDCEF07"><enum>(3)</enum><header>Limitation on
aggregate amount of bonds designated</header><text>The maximum aggregate face
amount of bonds which may be designated under this subsection shall not exceed
the product of $2,500 multiplied by the portion of the State population which
is in the Gulf Opportunity Zone (as determined on the basis of the most recent
census estimate of resident population released by the Bureau of Census before
August 28, 2005).</text>
</paragraph><paragraph id="ID450F90920ECB461588DD6D9134D41E40"><enum>(4)</enum><header>Special
rules</header><text>In applying this title to any qualified Gulf Opportunity
Zone Bond, the following modifications shall apply:</text>
<subparagraph id="idE7EB519A24854FE680413D53DF141724"><enum>(A)</enum><text>Section 143
(relating to mortgage revenue bonds: qualified mortgage bond and qualified
veterans' mortgage bond) shall be applied—</text>
<clause id="idE435361209824B22B05650CBD22869C0"><enum>(i)</enum><text>by treating any
residence in the Gulf Opportunity Zone as a targeted area residence,</text>
</clause><clause id="id6E078044E9A644F1B653E9420ACE49DC"><enum>(ii)</enum><text>by applying
subsection (f)(3) without regard to subparagraph (A) thereof, and</text>
</clause><clause id="idF1CF84245DAD43D891159B0691FE1F0C"><enum>(iii)</enum><text>by substituting
<quote>$150,000</quote> for <quote>$15,000</quote> in subsection (k)(4)
thereof.</text>
</clause></subparagraph><subparagraph id="IDD1E449724A7A4A35A8D972A499DF22E8"><enum>(B)</enum><text>Section 146
(relating to volume cap) shall not apply.</text>
</subparagraph><subparagraph id="IDC8E3CD5D32574F3BB3A99C4ADE12DE3B"><enum>(C)</enum><text>Section 57(a)(5)
shall not apply.</text>
</subparagraph></paragraph><paragraph id="ID9CA92671CDEF44E29CD60E5EB337FEDC"><enum>(5)</enum><header>Separate issue
treatment of portions of an issue</header><text>This subsection shall not apply
to the portion of an issue which (if issued as a separate issue) would be
treated as a qualified bond or as a bond that is not a private activity bond
(determined without regard to paragraph (1)), if the issuer elects to so treat
such portion.</text>
</paragraph></subsection><subsection id="ID5A8AD68E93724FE5A50D68E8CEE04198"><enum>(d)</enum><header>Advance
refundings of certain tax-exempt bonds</header>
<paragraph id="ID59BD6F871A034F369084A576918CB8C3"><enum>(1)</enum><header>In
general</header><text>With respect to a bond described in paragraph (2) issued
as part of an issue 90 percent (95 percent in the case of a bond described in
paragraph (2)(B)) or more of the net proceeds (as defined in section 150(a)(3))
of which were used to finance facilities located within the Gulf Opportunity
Zone (or property which is functionally related and subordinate to facilities
located within the Gulf Opportunity Zone), one additional advanced refunding
after the date of the enactment of this section and before January 1, 2007,
shall be allowed under the applicable rules of section 149(d) if—</text>
<subparagraph id="ID2B56A69E4C4C4D6F80C687CD1883BFC6"><enum>(A)</enum><text>the chief
executive officer of the issuer of the bond designates the advance refunding
bond for purposes of this subsection, and</text>
</subparagraph><subparagraph id="ID28263FEF31B14101898ED4E06CA43363"><enum>(B)</enum><text>the requirements
of paragraph (3) are met.</text>
</subparagraph></paragraph><paragraph id="ID6B115FF1D06A4CA79160FA9915C7A2ED"><enum>(2)</enum><header>Bonds
described</header><text>A bond is described in this paragraph if such bond was
outstanding on August 27, 2005, and is—</text>
<subparagraph id="ID204351B615FA4F328740280C92C1EDC6"><enum>(A)</enum><text>a State or local
bond (as defined in section 103(c)(1)) other than a private activity bond (as
defined in section 141(a)) issued by the State of Alabama, Louisiana, or
Mississippi (or any political subdivision thereof), or</text>
</subparagraph><subparagraph id="IDAFDB4D000CB04F30BA5219C17D319624"><enum>(B)</enum><text>a qualified
501(c)(3) bond (as defined in section 145(a)) issued by or on behalf of any
such State or political subdivision.</text>
</subparagraph></paragraph><paragraph id="IDF70B2665AF3F410FA0FDEE266CF3BEAE"><enum>(3)</enum><header>Additional
requirements</header><text>The requirements of this paragraph are met with
respect to any advance refunding of a bond described in paragraph (2)
if—</text>
<subparagraph id="ID1A1031755EBF43F99B907B3D6D327913"><enum>(A)</enum><text>no advance
refundings of such bond would be allowed under any provision of law after
August 27, 2005,</text>
</subparagraph><subparagraph id="ID1EF4E6810FE74F05953094D317E14B38"><enum>(B)</enum><text>the advance
refunding bond is the only other outstanding bond with respect to the refunded
bond, and</text>
</subparagraph><subparagraph id="ID746796448C6A4CB3AD3C6D10A2E14455"><enum>(C)</enum><text>the requirements
of section 148 are met with respect to all bonds issued under this
subsection.</text>
</subparagraph></paragraph></subsection><subsection id="IDE5A92F7C77144AA1B8EF5EE90FE5618E"><enum>(e)</enum><header>Low-income
housing credit</header>
<paragraph id="idF348B251E7C342ACACDFBE129989ED25"><enum>(1)</enum><header>Increase in
State housing credit ceiling</header>
<subparagraph id="id1634C4BCF20B43D9A5F43EEB4B098297"><enum>(A)</enum><header>In
general</header><text>In the case of the State of Alabama, Louisiana, or
Mississippi—</text>
<clause id="ID7E43595E8AF24A6687CC947B00C271AF"><enum>(i)</enum><text>the amount
otherwise determined under subclause (I) of section 42(h)(3)(C)(ii) for each
calendar year beginning after 2005 and before 2010 shall be increased by an
amount equal to 3 times the dollar amount otherwise specified for such calendar
year under such subclause multiplied by the State population located in the
Gulf Opportunity Zone (as determined on the basis of the most recent census
estimate of resident population released by the Bureau of Census before August
28, 2005), and</text>
</clause><clause id="id27E4E3F7D2AC4ED7B3965AED93EF8DA7"><enum>(ii)</enum><text>the unused State
housing credit ceiling for such State for any calendar year under section
42(h)(3)(C)(i) shall be determined without regard to the amount of the increase
determined under clause (i).</text>
</clause></subparagraph><subparagraph id="id9B3691D3FA36497295D2C14D7A02D1D5"><enum>(B)</enum><header>Elective
carryforward of unused increased ceiling</header>
<clause id="id40E60CC370AD4B2DAB1B32F865C041C2"><enum>(i)</enum><header>In
general</header><text>If the amount determined under section
42(h)(3)(C)(ii)(I), as increased under subparagraph (A)(i), for any calendar
year for any State described in subparagraph (A) exceeds the aggregate housing
credit dollar amount allocated during such calendar year by such State, such
State may elect to treat as a carryforward to the following calendar year an
amount equal to lesser of—</text>
<subclause id="id6FBAE02224CD484EB55D5A4E2151E78F"><enum>(I)</enum><text>the amount of
such excess, or</text>
</subclause><subclause id="id909EE7BD701F4804A79F14F516002513"><enum>(II)</enum><text>the amount by
which the amount determined under section 42(h)(3)(C)(ii)(I) for such calendar
year was increased under subparagraph (A)(i)).</text>
</subclause></clause><clause id="idF7BFAA001B084B4CA492DE44D36958AC"><enum>(ii)</enum><header>Use of
carryforward</header><text>If any State elects a carryforward under clause (i),
any housing credit dollar amount allocated by such State during the calendar
year following the calendar year in which the carryforward arose shall not be
considered so allocated for purposes of section 42(h)(3)(C) and section
42(h)(3)(D) to the extent such housing credit dollar amount does not exceed the
amount of the carryforward elected.</text>
</clause></subparagraph></paragraph><paragraph commented="no" id="H1697B81FCB754D68A872E4C368DDA7B4"><enum>(2)</enum><header>Difficult
development area</header>
<subparagraph id="H2DD067410040478DA93025573C4C35E2"><enum>(A)</enum><header>In
general</header><text>For purposes of section 42—</text>
<clause id="id171047E6EF81425BBC35C510EA6B144D"><enum>(i)</enum><text>in the case of
property placed in service during 2006, 2007, or 2008, the Gulf Opportunity
Zone—</text>
<subclause commented="no" id="HCB21DFFF150B493599081284B38F96F7"><enum>(I)</enum><text>shall be treated
as a difficult development area designated under subclause (I) of section
42(d)(5)(C)(iii), and</text>
</subclause><subclause commented="no" id="HB7CC2A04C9AA4739A611918BB27CAB3B"><enum>(II)</enum><text>shall not be
taken into account for purposes of applying the limitation under subclause (II)
of such section, and</text>
</subclause></clause><clause commented="no" id="id74AB0E3D9DA5401CBDA4CA6B75777911"><enum>(ii)</enum><text>subsection
(b)(2)(B) thereof shall be applied with respect to any such property placed in
service in the Gulf Opportunity Zone by substituting <quote>91 percent</quote>
and <quote>39 percent</quote> for <quote>70 percent</quote> and <quote>30
percent</quote>, respectively.</text>
</clause></subparagraph><subparagraph commented="no" id="HD4F4B8E1392F48769F5B383FDFA54F94"><enum>(B)</enum><header>Application</header><text>Subparagraph
(A) shall apply only to—</text>
<clause commented="no" id="H5091605ABE794CD5AD10A3F1B985BDC0"><enum>(i)</enum><text>housing credit
dollar amounts allocated during the period beginning on January 1, 2006, and
ending on December 31, 2008, and</text>
</clause><clause commented="no" id="HEB54D1FF55614073AB303166B6644DFA"><enum>(ii)</enum><text>buildings placed
in service during such period to the extent that paragraph (1) of section 42(h)
does not apply to any building by reason of paragraph (4) thereof, but only
with respect to bonds issued after December 31, 2005.</text>
</clause></subparagraph></paragraph></subsection><subsection id="id3023C2FE8F66411E97136D98A0799991"><enum>(f)</enum><header>Treatment of
representations regarding income eligibility for purposes of qualified
residential rental project requirements</header><text display-inline="yes-display-inline">For purposes of determining if any
residential rental project meets the requirements of section 142(d)(1) and if
any certification with respect to such project meets the requirements under
section 142(d)(7), the operator of the project may rely on the representations
of any individual applying for tenancy in such project that such individual's
income will not exceed the applicable income limits of section 142(d)(1) upon
commencement of the individual's tenancy if such tenancy begins during the
6-month period beginning on and after the date such individual was displaced by
reason of Hurricane Katrina.</text>
</subsection><subsection id="IDD6CDD73E6AA14DF9A8602E331DD63EAA"><enum>(g)</enum><header>Application of
new markets tax credit to investments in community development entities serving
Gulf Opportunity Zone</header><text>For purposes of section 45D—</text>
<paragraph id="id1A6F8EE8A3134A079534620601EFCA10"><enum>(1)</enum><text>a qualified
community development entity shall be eligible for an allocation under
subsection (f)(2) thereof of the increase in the new markets tax credit
limitation described in paragraph (2) only if a significant mission of such
entity is the recovery and redevelopment of the Gulf Opportunity Zone,</text>
</paragraph><paragraph id="id5F6B8DE8C27543DAA8376BD9D2FC0E8D"><enum>(2)</enum><text>the new markets
tax credit limitation otherwise determined under subsection (f)(1) thereof
shall be increased by an amount equal to—</text>
<subparagraph id="ID41E89678182B45C585C0811CC93B2DDF"><enum>(A)</enum><text>$300,000,000 for
2005 and 2006, to be allocated among qualified community development entities
to make qualified low-income community investments within the Gulf Opportunity
Zone, and</text>
</subparagraph><subparagraph id="IDB2AEC89194674C0C95504173CCAB9B7C"><enum>(B)</enum><text>$400,000,000 for
2007, to be so allocated, and</text>
</subparagraph></paragraph><paragraph commented="no" display-inline="no-display-inline" id="idBDB0F28668C84A078D12DC590A1E9136"><enum>(3)</enum><text>subsection (f)(3)
thereof shall be applied separately with respect to the amount of the increase
under paragraph (2).</text>
</paragraph></subsection><subsection id="idEFD83B652080429DAFA29A68A141FBAC"><enum>(h)</enum><header>Treatment of
net operating losses attributable to Gulf Opportunity Zone losses</header>
<paragraph id="id6B84CB93CECB48058E4CE9B7177FD187"><enum>(1)</enum><header>In
general</header><text>If a portion of any net operating loss of the taxpayer
for any taxable year is a qualified Gulf Opportunity Zone loss, the following
rules shall apply:</text>
<subparagraph id="idAD256434DF2B4058BF6D5BFAE963404D"><enum>(A)</enum><header>Extension of
carryback period</header><text>Section 172(b)(1) shall be applied with respect
to such portion—</text>
<clause id="id62D1725B79CE49B290FD4DC12A211B23"><enum>(i)</enum><text>by substituting
<quote>5 taxable years</quote> for <quote>2 taxable years</quote> in
subparagraph (A)(i), and</text>
</clause><clause id="id58CD712D201A4A0DB215FD4FCC88A8A3"><enum>(ii)</enum><text>by not taking
such portion into account in determining any eligible loss of the taxpayer
under subparagraph (F) for the taxable year.</text>
</clause></subparagraph><subparagraph commented="no" display-inline="no-display-inline" id="id076B8F9FF7C24637B035C5F6A2A2590A"><enum>(B)</enum><header>Suspension of
90 percent amt limitation</header><text display-inline="yes-display-inline">Section 56(d)(1) shall be applied by
increasing the amount determined under subparagraph (A)(ii)(I) thereof by the
sum of the carrybacks and carryovers of any net operating loss attributable to
such portion.</text>
</subparagraph></paragraph><paragraph id="id14874068C8524C57B9774DD80AB645B8"><enum>(2)</enum><header>Qualified Gulf
Opportunity Zone loss</header><text>For purposes of paragraph (1), the term
<term>qualified Gulf Opportunity Zone loss</term> means the lesser of—</text>
<subparagraph id="id7300CB657EBD46C39F92C5C57AA92D4A"><enum>(A)</enum><text>the amount of the
net operating loss for the taxable year, or</text>
</subparagraph><subparagraph id="id9B615F748E734021B56E44F5AC70570D"><enum>(B)</enum><text>the aggregate
amount of the following deductions for such taxable year:</text>
<clause id="id8CD5AD4B29474304A89A6B248AE633DE"><enum>(i)</enum><text>Any deduction for
any qualified Gulf Opportunity Zone casualty loss.</text>
</clause><clause id="idA58ED6993733497CB896953F117DEE5C"><enum>(ii)</enum><text>Any deduction
for moving expenses paid or incurred after August 27, 2005, and before January
1, 2008, and allowable under this chapter to any taxpayer in connection with
the employment of any individual—</text>
<subclause id="id19923880440A4FFC9E640B9C30C425FB"><enum>(I)</enum><text>whose principal
place of abode was located in the Gulf Opportunity Zone before August 28,
2005,</text>
</subclause><subclause id="id4C0DEF93B7574BAE8017420E6EB518AE"><enum>(II)</enum><text>who was unable
to remain in such abode as the result of Hurricane Katrina, and</text>
</subclause><subclause id="id2702EFF790C9434298D3EB5095FB2EC3"><enum>(III)</enum><text>whose principal
place of employment with the taxpayer after such expense is located in the Gulf
Opportunity Zone.</text>
</subclause><continuation-text continuation-text-level="clause">For purposes
of this clause, the term <term>moving expenses</term> has the meaning given
such term by section 217(b), except that the taxpayer's former residence and
new residence may be the same residence if the initial vacating of the
residence was as the result of Hurricane Katrina.</continuation-text></clause><clause id="id86F7F5C2AC104BF1930E3C793714F16C"><enum>(iii)</enum><text>Any deduction
for expenses paid or incurred after August 27, 2005, and before January 1,
2008, and allowable under this chapter to temporarily house any employee of the
taxpayer whose principal place of employment is in the Gulf Opportunity
Zone.</text>
</clause><clause id="id2ADBF49D4750429CAD575C7F9F030108"><enum>(iv)</enum><text>Any deduction
for depreciation (or amortization in lieu of depreciation) allowable under this
chapter with respect to any qualified Gulf Opportunity Zone property (as
defined in subsection (a)(2)) for the taxable year such property is placed in
service.</text>
</clause><clause id="idDA2B7D9469A24396B2E1A722418A504E"><enum>(v)</enum><text>Any deduction for
repair expenses (including expenses for removal of debris) allowable under this
chapter paid or incurred after August 27, 2005, and before January 1, 2008,
with respect to any damage attributable to Hurricane Katrina and in connection
with property which is located in the Gulf Opportunity Zone.</text>
</clause></subparagraph></paragraph><paragraph id="idA05039E8B54949CDA48FA2761AD4B798"><enum>(3)</enum><header>Qualified Gulf
Opportunity Zone casualty loss</header>
<subparagraph id="idB55F0D58880A4613BFB01676230A1300"><enum>(A)</enum><header>In
general</header><text>For purposes of paragraph (2)(B)(i), the term
<term>qualified Gulf Opportunity Zone casualty loss</term> means any
uncompensated section 1231 loss (as defined in section 1231(a)(3)(B)) of
property located in the Gulf Opportunity Zone if—</text>
<clause id="idCF973EC7864D438D8F1D3252EFAED22C"><enum>(i)</enum><text>such loss is
allowed as a deduction under section 165 for the taxable year, and</text>
</clause><clause id="id0A1DDB32FD394D538CA37F01E250844D"><enum>(ii)</enum><text>such loss is
attributable to Hurricane Katrina.</text>
</clause></subparagraph><subparagraph id="id5E223EDC88444B52BE9C068BCAC6B47D"><enum>(B)</enum><header>Reduction for
gains from involuntary conversion</header><text>The amount of qualified Gulf
Opportunity Zone casualty loss which would (but for this subparagraph) be taken
into account under subparagraph (A) for any taxable year shall be reduced by
the amount of any gain recognized by the taxpayer for such year from the
involuntary conversion by reason of Hurricane Katrina of property located in
the Gulf Opportunity Zone.</text>
</subparagraph><subparagraph id="idAEA6D7663F5F4C65ACD137CB67FF0632"><enum>(C)</enum><header>Coordination
with general disaster loss rules</header><text>Subsection (j) and section
165(i) shall not apply to any qualified Gulf Opportunity Zone casualty loss to
the extent such loss is taken into account under this subsection.</text>
</subparagraph></paragraph><paragraph commented="no" display-inline="no-display-inline" id="id40D9C4FE422647E5BF6EAFE216D8C9D7"><enum>(4)</enum><header>Special
rules</header><text>For purposes of paragraph (1), rules similar to the rules
of paragraphs (2) and (3) of section 172(i) shall apply with respect to such
portion.</text>
</paragraph></subsection><subsection id="idFDEBCFBC7C3245FB8147E13F45686791"><enum>(i)</enum><header>Treatment of
public utility property disaster losses</header>
<paragraph id="id6AC3B7A7C4634D8083421466456C0268"><enum>(1)</enum><header>In
general</header><text>Upon the election of the taxpayer, in the case of any
eligible public utility property loss—</text>
<subparagraph id="id15B8A6C6892B4E07A1953A0A87C38DE0"><enum>(A)</enum><text>section 165(i)
shall be applied by substituting <quote>the fifth taxable year immediately
preceding</quote> for <quote>the taxable year immediately
preceding</quote>,</text>
</subparagraph><subparagraph id="idD4144549DE6344A6B6E4C230296F820D"><enum>(B)</enum><text>an application
for a tentative carryback adjustment of the tax for any prior taxable year
affected by the application of subparagraph (A) may be made under section 6411,
and</text>
</subparagraph><subparagraph id="id951576D555CC4968B063B5B00314766D"><enum>(C)</enum><text>section 6611
shall not apply to any overpayment attributable to such loss.</text>
</subparagraph></paragraph><paragraph id="id9F63946F05454FCE9ED383BF1C194B08"><enum>(2)</enum><header>Eligible public
utility property loss</header><text>For purposes of this subsection—</text>
<subparagraph id="id872DE57AA85B45A490A24506C9640757"><enum>(A)</enum><header>In
general</header><text>The term <term>eligible public utility property
loss</term> means any loss with respect to public utility property located in
the Gulf Opportunity Zone and attributable to Hurricane Katrina.</text>
</subparagraph><subparagraph id="idF9AD93E5CE724B95B4583AA692F62639"><enum>(B)</enum><header>Public utility
property</header><text>The term <term>public utility property</term> has the
meaning given such term by section 168(i)(10) without regard to the matter
following subparagraph (D) thereof.</text>
</subparagraph></paragraph><paragraph commented="no" display-inline="no-display-inline" id="H6591A26B2676474CB129136D2CCAAC6B"><enum>(3)</enum><header>Waiver of
limitations</header><text>If refund or credit of any overpayment of tax
resulting from the application of paragraph (1) is prevented at any time before
the close of the 1-year period beginning on the date of the enactment of this
section by the operation of any law or rule of law (including res judicata),
such refund or credit may nevertheless be made or allowed if claim therefor is
filed before the close of such period.</text>
</paragraph></subsection><subsection display-inline="no-display-inline" id="H9A53DEC0353349A48C0416F72C51E26E"><enum>(j)</enum><header>Special rule for
Gulf Opportunity Zone public utility casualty losses</header>
<paragraph id="H9E4609731CB04BDFBC2FCB941285838"><enum>(1)</enum><header>In
general</header><text display-inline="yes-display-inline">The amount described
in section 172(f)(1)(A) for any taxable year shall be increased by the amount
of the Gulf Opportunity Zone public utility casualty loss for such year.</text>
</paragraph><paragraph id="HE070D417FE7B4F4BB485BCCE34C8A800"><enum>(2)</enum><header>Gulf Opportunity
Zone public utility casualty loss</header><text display-inline="yes-display-inline">For purposes of this subsection, the term
<term>Gulf Opportunity Zone public utility casualty loss</term> means any
casualty loss of public utility property (as defined in section 168(i)(10))
located in the Gulf Opportunity Zone if—</text>
<subparagraph id="H8C1009B351C54A5D8F9EBB2E37DEC505"><enum>(A)</enum><text>such loss is
allowed as a deduction under section 165 for the taxable year,</text>
</subparagraph><subparagraph id="H4F358F53771A40C99DA915283EFECE78"><enum>(B)</enum><text>such loss is
attributable to Hurricane Katrina, and</text>
</subparagraph><subparagraph id="H0F1861632F3D4D58AD8074ACC6FDBE5B"><enum>(C)</enum><text>the taxpayer
elects the application of this subsection with respect to such loss.</text>
</subparagraph></paragraph><paragraph id="HE724CBD61DC34B68B47500F4E9B6B067"><enum>(3)</enum><header>Reduction for
gains from involuntary conversion</header><text>The amount of Gulf Opportunity
Zone public utility casualty loss which would (but for this paragraph) be taken
into account under paragraph (1) for any taxable year shall be reduced by the
amount of any gain recognized by the taxpayer for such year from the
involuntary conversion by reason of Hurricane Katrina of public utility
property (as so defined) located in the Gulf Opportunity Zone.</text>
</paragraph><paragraph id="H6A7D031288A34912B2FC11B7DE2006E"><enum>(4)</enum><header>Coordination with
general disaster loss rules</header><text>Subsection (h) and section 165(i)
shall not apply to any Gulf Opportunity Zone public utility casualty loss to
the extent such loss is taken into account under paragraph (1).</text>
</paragraph><paragraph id="id1C43A8845B054BFCB4E4456178484897"><enum>(5)</enum><header>Election</header><text>Any
election under paragraph (2)(C) shall be made in such manner as may be
prescribed by the Secretary and shall be made by the due date (including
extensions of time) for filing the taxpayer’s return for the taxable year of
the loss. Such election, once made for any taxable year, shall be irrevocable
for such taxable year.</text>
</paragraph></subsection><subsection display-inline="no-display-inline" id="H0D7EB0650A364FEFA1263D47E20200F4"><enum>(k)</enum><header>Special rules
for small timber producers</header>
<paragraph id="H060D6F5793FD495B845263F5CAC6F207"><enum>(1)</enum><header>Increased
expensing for qualified timber property</header><text>In the case of qualified
timber property any portion of which is located in the Gulf Opportunity Zone,
in that portion of the Rita GO Zone which is not part of the Gulf Opportunity
Zone, or in the Wilma GO Zone, the limitation under subparagraph (B) of section
194(b)(1) shall be increased by the lesser of—</text>
<subparagraph id="H887C5FDE60984EDA836040D0E7D3BECC"><enum>(A)</enum><text>the limitation
which would (but for this subsection) apply under such subparagraph, or</text>
</subparagraph><subparagraph id="H75BC0585B68F4DF3BD4612367711A726"><enum>(B)</enum><text>the amount of
reforestation expenditures (as defined in section 194(c)(3)) paid or incurred
by the taxpayer with respect to such qualified timber property during the
specified portion of the taxable year.</text>
</subparagraph></paragraph><paragraph id="H19856225670C47FD00D23ED6D8F438F0"><enum>(2)</enum><header>5 year NOL
carryback of certain timber losses</header><text>For purposes of determining
farming loss under section 172(i), income and deductions which are allocable to
the specified portion of the taxable year and which are attributable to
qualified timber property any portion of which is located in the Gulf
Opportunity Zone, in that portion of the Rita GO Zone which is not part of the
Gulf Opportunity Zone, or in the Wilma GO Zone shall be treated as attributable
to farming businesses.</text>
</paragraph><paragraph id="idB81CAA52AF794AD787670F1690A71F32"><enum>(3)</enum><header>Rules not
applicable to certain entities</header><text>Paragraphs (1) and (2) shall not
apply to any taxpayer which—</text>
<subparagraph id="id16A31D8F5E6C40D5BEAF754CF236F821"><enum>(A)</enum><text>is a corporation
the stock of which is publicly traded on an established securities market,
or</text>
</subparagraph><subparagraph id="id567D875BC5C14D1F9C44E2485DA08168"><enum>(B)</enum><text>is a real estate
investment trust.</text>
</subparagraph></paragraph><paragraph id="id1107EFDD0EEE415E8E79303460CA3697"><enum>(4)</enum><header>Rules not
applicable to large timber producers</header><text>Paragraphs (1) and (2) shall
not apply with respect to any qualified timber property unless—</text>
<subparagraph id="H114D6A51EE9F4E3085BAD5BEA10006AC"><enum>(A)</enum><text>such property was
held by the taxpayer—</text>
<clause display-inline="no-display-inline" id="idD854E7F6FEB44F849DBBF311D8509EAC"><enum>(i)</enum><text display-inline="yes-display-inline">on August 28, 2005, in the case of
qualified timber property any portion of which is located in the Gulf
Opportunity Zone,</text>
</clause><clause id="id0738272F419749CA956F28973AEB491E"><enum>(ii)</enum><text display-inline="yes-display-inline">on September 23, 2005, in the case of
qualified timber property (other than property described in subclause (I)) any
portion of which is located in that portion of the Rita GO Zone which is not
part of the Gulf Opportunity Zone, or</text>
</clause><clause id="idE7D1FE6FF91E41969C12A090B0CD390F"><enum>(iii)</enum><text>on October 23,
2005, in the case of qualified timber property (other than property described
in subclause (I) or (II)) any portion of which is located in the Wilma GO Zone,
and</text>
</clause></subparagraph><subparagraph id="H8910B6A133C3466EB5642400F4264625"><enum>(B)</enum><text display-inline="yes-display-inline">such taxpayer held not more than 500 acres
of qualified timber property on such date.</text>
</subparagraph></paragraph><paragraph id="H2E216E5B49A8408CBBA81E99D892C908"><enum>(5)</enum><header>Definitions</header><text>For
purposes of this subsection—</text>
<subparagraph id="HB4E0AD08F81F429E8BBCE8B15C577350"><enum>(A)</enum><header>Specified
portion</header><text display-inline="yes-display-inline">The term
<term>specified portion</term> means—</text>
<clause display-inline="no-display-inline" id="HE488134783E9492281BC19ECB7AB9171"><enum>(i)</enum><text display-inline="yes-display-inline">in the case of qualified timber property
located in the Gulf Opportunity Zone, that portion of the taxable year which is
on or after August 28, 2005, and before January 1, 2007,</text>
</clause><clause id="H57CF63B81C644D768CC53401ECD7EFB"><enum>(ii)</enum><text display-inline="yes-display-inline">in the case of qualified timber property
located in the Rita GO Zone and no part of which is located in the Gulf
Opportunity Zone, that portion of the taxable year which is on or after
September 23, 2005, and before January 1, 2007, and</text>
</clause><clause id="idA2DE203B946742AC9C01E0D35C74EDE3"><enum>(iii)</enum><text display-inline="yes-display-inline">in the case of qualified timber property
located in the Wilma GO Zone, that portion of the taxable year which is on or
after October 23, 2005, and before January 1, 2007.</text>
</clause></subparagraph><subparagraph commented="no" display-inline="no-display-inline" id="H22F8AD8A6AC34D3A9DEA3FBF520058AC"><enum>(B)</enum><header>Qualified timber
property</header><text>The term <term>qualified timber property</term> has the
meaning given such term in section 194(c)(1).</text>
</subparagraph></paragraph></subsection><subsection display-inline="no-display-inline" id="HB1945AB604F440E0827F85DD7E743CCF"><enum>(l)</enum><header>Expensing for
certain demolition and clean-Up costs</header>
<paragraph id="HEAB900B4255E44EF00EC00D0B125DA88"><enum>(1)</enum><header>In
general</header><text>A taxpayer may elect to treat 50 percent of any qualified
Gulf Opportunity Zone clean-up cost as an expense which is not chargeable to
capital account. Any cost so treated shall be allowed as a deduction for the
taxable year in which such cost is paid or incurred.</text>
</paragraph><paragraph id="H81A3CFC533024490BF47E9A7E58C499B"><enum>(2)</enum><header>Gulf Opportunity
Zone clean-up cost</header><text display-inline="yes-display-inline">For
purposes of this subsection, the term <term>Gulf Opportunity Zone clean-up
cost</term> means any amount paid or incurred during the period beginning on
August 28, 2005, and ending on December 31, 2007, for the removal of debris
from, or the demolition of structures on, real property which is located in the
Gulf Opportunity Zone and which is—</text>
<subparagraph id="HAE08B3CDCD994D8AB62B496818737C8E"><enum>(A)</enum><text>held by the
taxpayer for use in a trade or business or for the production of income,
or</text>
</subparagraph><subparagraph id="HBE9046031533466E8F5E2F10D6EA4CBC"><enum>(B)</enum><text>property described
in section 1221(a)(1) in the hands of the taxpayer.</text>
</subparagraph><continuation-text continuation-text-level="paragraph">For
purposes of the preceding sentence, amounts paid or incurred shall be taken
into account only to the extent that such amount would (but for paragraph (1))
be chargeable to capital account.</continuation-text></paragraph></subsection><subsection id="H44141EA097ED4C6493C9017C2B77DF3E"><enum>(m)</enum><header>Extension of
expensing for environmental remediation costs</header><text>With respect to any
qualified environmental remediation expenditure (as defined in section 198(b))
paid or incurred on or after August 28, 2005, in connection with a qualified
contaminated site located in the Gulf Opportunity Zone, section 198 (relating
to expensing of environmental remediation costs) shall be applied—</text>
<paragraph id="HE535366266174800830110E3F3CC8A7"><enum>(1)</enum><text>by substituting
<quote>December 31, 2007</quote> for <quote>December 31, 2006</quote> in
subsection (h) thereof, and</text>
</paragraph><paragraph id="H70D9F4DA2C4640CAA800A70236B3505C"><enum>(2)</enum><text>except as provided
in section 198(d)(2), by treating petroleum products (as defined in section
4612(a)(3)) as a hazardous substance.</text>
</paragraph></subsection><subsection id="id01FEE6980ECE42678A19A25BBFDCC026"><enum>(n)</enum><header>Gulf
Opportunity Zone</header><text>For purposes of this section, the term
<term>Gulf Opportunity Zone</term> means an area—</text>
<paragraph id="id072B829994304CEB80D1A0DBDB3A02C8"><enum>(1)</enum><text>with respect to
which a major disaster has been declared by the President under section 401 of
the Robert T. Stafford Disaster Relief and Emergency Assistance Act as a result
of Hurricane Katrina, and</text>
</paragraph><paragraph id="idEB5B02B8C6734020AEEBCC8495FE4050"><enum>(2)</enum><text>which is
determined by the President to warrant individual assistance, or individual and
public assistance, from the Federal Government under such
Act.</text>
</paragraph></subsection></section></subchapter><after-quoted-block></after-quoted-block></quoted-block>
</subsection><subsection id="ID9A2792D5705145C0B7E5B9B96D1748F9"><enum>(b)</enum><header>Clerical
amendments</header><text>The table of subchapters for chapter 1 is amended by
adding at the end the following new item:</text>
<quoted-block id="IDD874E4766E154B4C9EF149C76D1B9FC9" style="USC">
<toc regeneration="no-regeneration">
<toc-entry level="subchapter">Subchapter Z—Hurricane relief
benefits.</toc-entry>
</toc>
<after-quoted-block>.</after-quoted-block></quoted-block>
</subsection></section><section id="idFD8F88FFF0014CBD834243ADC41C6B34"><enum>102.</enum><header>Expansion of
Hope Scholarship and Lifetime Learning Credit for students in the Gulf
Opportunity Zone</header><text display-inline="no-display-inline">In the case
of an individual who attends an eligible educational institution (as defined in
section 25A(f)(2) of the Internal Revenue Code of 1986) located in the Gulf
Opportunity Zone (as defined in section 1400N(1) of such Code) for any taxable
year beginning during 2005 or 2006—</text>
<paragraph id="idAB9B5337BFA849D79CBCC69BEEF78AD2"><enum>(1)</enum><text>in applying
section 25A of the Internal Revenue Code of 1986, the term <term>qualified
tuition and related expenses</term> shall include any costs which are qualified
higher education expenses (as defined in section 529(e)(3) of such
Code),</text>
</paragraph><paragraph id="id3D9D457C2BD2430D89BC89531BB0CBDC"><enum>(2)</enum><text>each of the
dollar amounts in effect under of subparagraphs (A) and (B) of section
25A(b)(1) of such Code shall be twice the amount otherwise in effect before the
application of this subsection, and</text>
</paragraph><paragraph commented="no" display-inline="no-display-inline" id="idC3CE068780D54088BE5338854C0A5DF3"><enum>(3)</enum><text>section 25A(c)(1)
of such Code shall be applied by substituting <quote>40 percent</quote> for
<quote>20 percent</quote>.</text>
</paragraph></section><section commented="no" display-inline="no-display-inline" id="idA889317A178B4684A3C72F5A835B58ED"><enum>103.</enum><header>Extension of
special rules for mortgage revenue bonds</header><text display-inline="no-display-inline">Section 404(d) of the Katrina Emergency Tax
Relief Act of 2005 is amended by striking <quote>December 31, 2007</quote> and
inserting <quote>December 31, 2010</quote>.</text>
</section></subtitle><subtitle id="id81C52A2036944B82AC373C923CF21838"><enum>B</enum><header>Tax benefits
related to Hurricanes Rita and Wilma</header>
<section display-inline="no-display-inline" id="HFFFC9760340C4C258D47C51700AEB143" section-type="subsequent-section"><enum>111.</enum><header>Extension of certain
emergency tax relief for Hurricane Katrina to Hurricanes Rita and
Wilma</header>
<subsection id="H6A07B004137C4E76A371A04515C728DB"><enum>(a)</enum><header>In
general</header><text>Subchapter Z of chapter 1, as added by this Act, is
amended by adding at the end the following new sections:</text>
<quoted-block display-inline="no-display-inline" id="HE90F1A49CC274E97811B1DB3FA248B0" style="OLC">
<section id="IDE4695450B86B409597633FD1058B7B40"><enum>1400P.</enum><header>Special
rules for mortgage revenue bonds</header>
<subsection id="IDD3EA5E610D094EB68A3F1E76AF9BBA88"><enum>(a)</enum><header>In
general</header><text>In the case of financing provided with respect to
residences in the GO Zone, the Rita GO Zone, or the Wilma GO Zone, section 143
shall be applied—</text>
<paragraph id="id8A24E904321A4186B9EC42770A2B9E8B"><enum>(1)</enum><text>by treating any
residence in the GO Zone, the Rita GO Zone, or the Wilma GO Zone as a targeted
area residence,</text>
</paragraph><paragraph id="id7DA97CFE58DA4E919AFB7C17224E0D0C"><enum>(2)</enum><text>by applying
subsection (f)(3) without regard to subparagraph (A) thereof, and</text>
</paragraph><paragraph id="idE1F694BE5A1E4609B85205CF7A62F29F"><enum>(3)</enum><text>by substituting
<quote>$150,000</quote> for <quote>$15,000</quote> in subsection (k)(4)
thereof.</text>
</paragraph></subsection><subsection commented="no" display-inline="no-display-inline" id="ID517E46E5B3C54DBD913BA2AFEC021249"><enum>(b)</enum><header>Application</header><text>Subsection
(a) shall not apply to financing provided after December 31, 2010.</text>
</subsection></section><section id="H2663928BDEF74E5DA585AC7DE2BAF5C1"><enum>.</enum><header>Special rules for
use of retirement funds</header>
<subsection display-inline="no-display-inline" id="HC48FFB2AD3E443A3972893ADDE343262"><enum>(a)</enum><header>Tax-favored
withdrawals from retirement plans</header>
<paragraph id="H6A8FD2BD5D484F9B89EB3D7900ABC9BB"><enum>(1)</enum><header>In
general</header><text>Section 72(t) shall not apply to any qualified hurricane
distribution.</text>
</paragraph><paragraph id="H44B460F1DF494696ACEB100221E7B51"><enum>(2)</enum><header>Aggregate dollar
limitation</header>
<subparagraph id="HABA83EDEC74D45B2A691AF4500681298"><enum>(A)</enum><header>In
general</header><text>For purposes of this subsection, the aggregate amount of
distributions received by an individual which may be treated as qualified
hurricane distributions for any taxable year shall not exceed the excess (if
any) of—</text>
<clause id="H4FFF386120384ACF84F385056B094D18"><enum>(i)</enum><text>$100,000,
over</text>
</clause><clause id="H73589A2F263245E8AB3EAB8CF9150410"><enum>(ii)</enum><text>the aggregate
amounts treated as qualified hurricane distributions received by such
individual for all prior taxable years.</text>
</clause></subparagraph><subparagraph id="H82719AAB3A5B41D5BD5B283F151E7FA2"><enum>(B)</enum><header>Treatment of
plan distributions</header><text>If a distribution to an individual would
(without regard to subparagraph (A)) be a qualified hurricane distribution, a
plan shall not be treated as violating any requirement of this title merely
because the plan treats such distribution as a qualified hurricane
distribution, unless the aggregate amount of such distributions from all plans
maintained by the employer (and any member of any controlled group which
includes the employer) to such individual exceeds $100,000.</text>
</subparagraph><subparagraph id="H8E0CE8991EE24419AB83F24B78E440C5"><enum>(C)</enum><header>Controlled
group</header><text>For purposes of subparagraph (B), the term <term>controlled
group</term> means any group treated as a single employer under subsection (b),
(c), (m), or (o) of section 414.</text>
</subparagraph></paragraph><paragraph id="H57C79CD7292D4A79AD3C5170B925533B"><enum>(3)</enum><header>Amount
distributed may be repaid</header>
<subparagraph id="H15B99D29EC574A00BB5360FC5FB37BC5"><enum>(A)</enum><header>In
general</header><text>Any individual who receives a qualified hurricane
distribution may, at any time during the 3-year period beginning on the day
after the date on which such distribution was received, make one or more
contributions in an aggregate amount not to exceed the amount of such
distribution to an eligible retirement plan of which such individual is a
beneficiary and to which a rollover contribution of such distribution could be
made under section 402(c), 403(a)(4), 403(b)(8), 408(d)(3), or 457(e)(16), as
the case may be.</text>
</subparagraph><subparagraph id="H13004AA4F3C1427E9DA55989A3488DBF"><enum>(B)</enum><header>Treatment of
repayments of distributions from eligible retirement plans other than
IRAs</header><text>For purposes of this title, if a contribution is made
pursuant to subparagraph (A) with respect to a qualified hurricane distribution
from an eligible retirement plan other than an individual retirement plan, then
the taxpayer shall, to the extent of the amount of the contribution, be treated
as having received the qualified hurricane distribution in an eligible rollover
distribution (as defined in section 402(c)(4)) and as having transferred the
amount to the eligible retirement plan in a direct trustee to trustee transfer
within 60 days of the distribution.</text>
</subparagraph><subparagraph id="HC56989EB31B944E7A9237574F3FCA85F"><enum>(C)</enum><header>Treatment of
repayments for distributions from IRAs</header><text>For purposes of this
title, if a contribution is made pursuant to subparagraph (A) with respect to a
qualified hurricane distribution from an individual retirement plan (as defined
by section 7701(a)(37)), then, to the extent of the amount of the contribution,
the qualified hurricane distribution shall be treated as a distribution
described in section 408(d)(3) and as having been transferred to the eligible
retirement plan in a direct trustee to trustee transfer within 60 days of the
distribution.</text>
</subparagraph></paragraph><paragraph id="H7E1BB9234015434983F150C8499872B"><enum>(4)</enum><header>Definitions</header><text>For
purposes of this subsection—</text>
<subparagraph id="HC48994B922524D9F995ECBED91605EC"><enum>(A)</enum><header>Qualified
hurricane distribution</header><text>Except as provided in paragraph (2), the
term <term>qualified hurricane distribution</term> means—</text>
<clause id="H926348741201477AAE2047D9DF234EB"><enum>(i)</enum><text display-inline="yes-display-inline">any distribution from an eligible
retirement plan made on or after August 25, 2005, and before January 1, 2007,
to an individual whose principal place of abode on August 28, 2005, is located
in the Hurricane Katrina disaster area and who has sustained an economic loss
by reason of Hurricane Katrina,</text>
</clause><clause id="H7C59DB15692C4F52A5C3BC5D0000A63"><enum>(ii)</enum><text display-inline="yes-display-inline">any distribution (which is not described in
clause (i)) from an eligible retirement plan made on or after September 23,
2005, and before January 1, 2007, to an individual whose principal place of
abode on September 23, 2005, is located in the Hurricane Rita disaster area and
who has sustained an economic loss by reason of Hurricane Rita, and</text>
</clause><clause id="idDCA8BCC2E157441FAD9B7DB9C72FBAC4"><enum>(iii)</enum><text display-inline="yes-display-inline">any distribution (which is not described in
clause (i) or (ii)) from an eligible retirement plan made on or after October
23, 2005, and before January 1, 2007, to an individual whose principal place of
abode on October 23, 2005, is located in the Hurricane Wilma disaster area and
who has sustained an economic loss by reason of Hurricane Wilma.</text>
</clause></subparagraph><subparagraph id="H380F130EFC644BA083B87E49FDEF29B1"><enum>(B)</enum><header>Eligible
retirement plan</header><text>The term <term>eligible retirement plan</term>
shall have the meaning given such term by section 402(c)(8)(B).</text>
</subparagraph></paragraph><paragraph id="HF3631B09CDEC43A0A47990A1AA247DCE"><enum>(5)</enum><header>Income inclusion
spread over 3-year period</header>
<subparagraph id="H31A48DA53E9E40F1B92B7EE04B7EF0B6"><enum>(A)</enum><header>In
general</header><text>In the case of any qualified hurricane distribution,
unless the taxpayer elects not to have this paragraph apply for any taxable
year, any amount required to be included in gross income for such taxable year
shall be so included ratably over the 3-taxable year period beginning with such
taxable year.</text>
</subparagraph><subparagraph id="HBD0178EF91594AE8B49B7264E7DFE2B8"><enum>(B)</enum><header>Special
rule</header><text>For purposes of subparagraph (A), rules similar to the rules
of subparagraph (E) of section 408A(d)(3) shall apply.</text>
</subparagraph></paragraph><paragraph id="H5ABFC648BA694A29A9F053D883A40976"><enum>(6)</enum><header>Special
rules</header>
<subparagraph id="H418B5C575E1142CDAD92FFC4DDE843C7"><enum>(A)</enum><header>Exemption of
distributions from trustee to trustee transfer and withholding
rules</header><text>For purposes of sections 401(a)(31), 402(f), and 3405,
qualified hurricane distributions shall not be treated as eligible rollover
distributions.</text>
</subparagraph><subparagraph id="HC99E9CEDBB7E448A944871EEFF5762C4"><enum>(B)</enum><header>Qualified
hurricane distributions treated as meeting plan distribution
requirements</header><text>For purposes this title, a qualified hurricane
distribution shall be treated as meeting the requirements of sections
401(k)(2)(B)(i), 403(b)(7)(A)(ii), 403(b)(11), and 457(d)(1)(A).</text>
</subparagraph></paragraph></subsection><subsection display-inline="no-display-inline" id="H7415BD88B5E0482C9672E5003525A6E4"><enum>(b)</enum><header>Recontributions
of withdrawals for home purchases</header>
<paragraph id="H0A07F4A178F142C29E67D8B7640036A6"><enum>(1)</enum><header>Recontributions</header>
<subparagraph id="H9D992CD902754EE097206EDE94C554E4"><enum>(A)</enum><header>In
general</header><text>Any individual who received a qualified distribution may,
during the applicable period, make one or more contributions in an aggregate
amount not to exceed the amount of such qualified distribution to an eligible
retirement plan (as defined in section 402(c)(8)(B)) of which such individual
is a beneficiary and to which a rollover contribution of such distribution
could be made under section 402(c), 403(a)(4), 403(b)(8), or 408(d)(3), as the
case may be.</text>
</subparagraph><subparagraph id="H021FABE4D5654B92A3645EF958436B70"><enum>(B)</enum><header>Treatment of
repayments</header><text>Rules similar to the rules of subparagraphs (B) and
(C) of subsection (a)(3) shall apply for purposes of this subsection.</text>
</subparagraph></paragraph><paragraph display-inline="no-display-inline" id="H23906B865CDB4F5C9C00EEBB994E908F"><enum>(2)</enum><header>Qualified
distribution</header><text>For purposes of this subsection—</text>
<subparagraph id="H8D9E8000138B466C9374E49410B18F6F"><enum>(A)</enum><header>In
general</header><text>The term <term>qualified distribution</term> means any
qualified Katrina distribution, any qualified Rita distribution, and any
qualified Wilma distribution.</text>
</subparagraph><subparagraph id="HABF28DE9899A409BB1C539B6859E12C1"><enum>(B)</enum><header>Qualified
Katrina distribution</header><text>The term <term>qualified Katrina
distribution</term> means any distribution—</text>
<clause display-inline="no-display-inline" id="H82E9428A9FDE43F192E7E16431EFFA53"><enum>(i)</enum><text>described in
section 401(k)(2)(B)(i)(IV), 403(b)(7)(A)(ii) (but only to the extent such
distribution relates to financial hardship), 403(b)(11)(B), or
72(t)(2)(F),</text>
</clause><clause id="HE7874E77CF324087A22F34DD11B6C377"><enum>(ii)</enum><text>received after
February 28, 2005, and before August 29, 2005, and</text>
</clause><clause id="HC16EDF00ABD4422B9E99C21BB0EF4778"><enum>(iii)</enum><text>which was to be
used to purchase or construct a principal residence in the Hurricane Katrina
disaster area, but which was not so purchased or constructed on account of
Hurricane Katrina.</text>
</clause></subparagraph><subparagraph id="H7355369260AE43FABA0043E57DF0030"><enum>(C)</enum><header>Qualified Rita
distribution</header><text>The term <term>qualified Rita distribution</term>
means any distribution (other than a qualified Katrina distribution)—</text>
<clause id="HCEDE1FF46AAB44B8BE1BC7B300373758"><enum>(i)</enum><text>described in
section 401(k)(2)(B)(i)(IV), 403(b)(7)(A)(ii) (but only to the extent such
distribution relates to financial hardship), 403(b)(11)(B), or
72(t)(2)(F),</text>
</clause><clause id="HBD0C03539C094D00A67D2455C59B5363"><enum>(ii)</enum><text>received after
February 28, 2005, and before September 24, 2005, and</text>
</clause><clause id="HA4B79D88A9AB430F8E1B49695E2E83AD"><enum>(iii)</enum><text>which was to be
used to purchase or construct a principal residence in the Hurricane Rita
disaster area, but which was not so purchased or constructed on account of
Hurricane Rita.</text>
</clause></subparagraph><subparagraph id="idCB1E2C8D5B174400BB6BA33D6FCE1F14"><enum>(D)</enum><header>Qualified Wilma
distribution</header><text>The term <term>qualified Wilma distribution</term>
means any distribution (other than a qualified Katrina distribution or a
qualified Rita distribution)—</text>
<clause id="idECD89E771AE7465BBC4A45D20F806954"><enum>(i)</enum><text>described in
section 401(k)(2)(B)(i)(IV), 403(b)(7)(A)(ii) (but only to the extent such
distribution relates to financial hardship), 403(b)(11)(B), or
72(t)(2)(F),</text>
</clause><clause id="id6A2AF0B83E38447E8A6B74C391BE3019"><enum>(ii)</enum><text>received after
February 28, 2005, and before October 24, 2005, and</text>
</clause><clause id="id63F3DC159A754D33B2B0B378465C4B29"><enum>(iii)</enum><text>which was to be
used to purchase or construct a principal residence in the Hurricane Wilma
disaster area, but which was not so purchased or constructed on account of
Hurricane Wilma.</text>
</clause></subparagraph></paragraph><paragraph id="H5F80CEBEE7784A74B9039806853F045C"><enum>(3)</enum><header>Applicable
period</header><text>For purposes of this subsection, the term <term>applicable
period</term> means—</text>
<subparagraph id="H23225FA676BE4F6987F919C0F4C9A77E"><enum>(A)</enum><text>with respect to
any qualified Katrina distribution, the period beginning on August 25, 2005,
and ending on February 28, 2006,</text>
</subparagraph><subparagraph id="H50C04EECF5E54A1E87BFCAD4D85DBA5"><enum>(B)</enum><text display-inline="yes-display-inline">with respect to any qualified Rita
distribution, the period beginning on September 23, 2005, and ending on
February 28, 2006, and</text>
</subparagraph><subparagraph id="idF195B8DE92D44025B5EE679BA4BD10C6"><enum>(C)</enum><text display-inline="yes-display-inline">with respect to any qualified Wilma
distribution, the period beginning on October 23, 2005, and ending on February
28, 2006.</text>
</subparagraph></paragraph></subsection><subsection display-inline="no-display-inline" id="HA8ADA78E163D4B12B1FF8FF5B68DF9F"><enum>(c)</enum><header>Loans from
qualified plans</header>
<paragraph id="H4AE62939A31940EE90CDFC14D6B5D79"><enum>(1)</enum><header>Increase in limit
on loans not treated as distributions</header><text>In the case of any loan
from a qualified employer plan (as defined under section 72(p)(4)) to a
qualified individual made during the applicable period—</text>
<subparagraph id="HB1018015947D4F1B898F174CFE218503"><enum>(A)</enum><text>clause (i) of
section 72(p)(2)(A) shall be applied by substituting <quote>$100,000</quote>
for <quote>$50,000</quote>, and</text>
</subparagraph><subparagraph id="H7407197BE54642A89BF401F4F730000"><enum>(B)</enum><text>clause (ii) of such
section shall be applied by substituting <quote>the present value of the
nonforfeitable accrued benefit of the employee under the plan</quote> for
<quote>one-half of the present value of the nonforfeitable accrued benefit of
the employee under the plan</quote>.</text>
</subparagraph></paragraph><paragraph id="H5E46038591C94853AF392601F8189176"><enum>(2)</enum><header>Delay of
repayment</header><text>In the case of a qualified individual with an
outstanding loan on or after the qualified beginning date from a qualified
employer plan (as defined in section 72(p)(4))—</text>
<subparagraph id="H0E214D6946CA41C68DCF3D09AD1BC547"><enum>(A)</enum><text>if the due date
pursuant to subparagraph (B) or (C) of section 72(p)(2) for any repayment with
respect to such loan occurs during the period beginning on the qualified
beginning date and ending on December 31, 2006, such due date shall be delayed
for 1 year,</text>
</subparagraph><subparagraph id="HA2A5348CE70D4A95BC67F4F623989B29"><enum>(B)</enum><text>any subsequent
repayments with respect to any such loan shall be appropriately adjusted to
reflect the delay in the due date under paragraph (1) and any interest accruing
during such delay, and</text>
</subparagraph><subparagraph id="HACC12CD2707E4D6296FDBDCBD5001EC7"><enum>(C)</enum><text>in determining the
5-year period and the term of a loan under subparagraph (B) or (C) of section
72(p)(2), the period described in subparagraph (A) shall be disregarded.</text>
</subparagraph></paragraph><paragraph id="HEFCCF3814889471B8029DAD5766EC507"><enum>(3)</enum><header>Qualified
individual</header><text display-inline="yes-display-inline">For purposes of
this subsection—</text>
<subparagraph id="HF65FC82571814672A1BCA7004811CCBC"><enum>(A)</enum><header>In
general</header><text>The term <term>qualified individual</term> means any
qualified Hurricane Katrina individual, any qualified Hurricane Rita
individual, and any qualified Hurricane Wilma individual.</text>
</subparagraph><subparagraph id="H7F9968F802714D98861568843183F191"><enum>(B)</enum><header>Qualified
Hurricane Katrina individual</header><text>The term <term>qualified Hurricane
Katrina individual</term> means an individual whose principal place of abode on
August 28, 2005, is located in the Hurricane Katrina disaster area and who has
sustained an economic loss by reason of Hurricane Katrina.</text>
</subparagraph><subparagraph id="H72D280B0D31A4824A44060D8DF42BA1F"><enum>(C)</enum><header>Qualified
Hurricane Rita individual</header><text>The term <term>qualified Hurricane Rita
individual</term> means an individual (other than a qualified Hurricane Katrina
individual) whose principal place of abode on September 23, 2005, is located in
the Hurricane Rita disaster area and who has sustained an economic loss by
reason of Hurricane Rita.</text>
</subparagraph><subparagraph id="id00D61B81210444EEA1C28D48811EE646"><enum>(D)</enum><header>Qualified
Hurricane Wilma individual</header><text>The term <term>qualified Hurricane
Wilma individual</term> means an individual (other than a qualified Hurricane
Katrina individual or a qualified Hurricane Rita individual) whose principal
place of abode on October 23, 2005, is located in the Hurricane Wilma disaster
area and who has sustained an economic loss by reason of Hurricane
Wilma.</text>
</subparagraph></paragraph><paragraph id="H0622B1A929DC4D31B27CFADC75CFECA8"><enum>(4)</enum><header>Applicable
period; qualified beginning date</header><text>For purposes of this
subsection—</text>
<subparagraph display-inline="no-display-inline" id="H211B86E510354E71A7F28CE8953D136F"><enum>(A)</enum><header>Hurricane
Katrina</header><text>In the case of any qualified Hurricane Katrina
individual—</text>
<clause id="H5197D46ACE8747B9A32F52B356F548A4"><enum>(i)</enum><text>the applicable
period is the period beginning on September 24, 2005, and ending on December
31, 2006, and</text>
</clause><clause id="H9F00F41CF348480A92040407E1C5A108"><enum>(ii)</enum><text>the qualified
beginning date is August 25, 2005.</text>
</clause></subparagraph><subparagraph id="H655E1F98235F458B803B3556001BDF72"><enum>(B)</enum><header>Hurricane
Rita</header><text>In the case of any qualified Hurricane Rita
individual—</text>
<clause id="HC221993A4A2341B300DED89650220061"><enum>(i)</enum><text>the applicable
period is the period beginning on the date of the enactment of this subsection
and ending on December 31, 2006, and</text>
</clause><clause id="HF5496E66B221434DA1F7ABDB933CBEE0"><enum>(ii)</enum><text>the qualified
beginning date is September 23, 2005.</text>
</clause></subparagraph><subparagraph id="idB02635B7EC6E42E280814D655AEA7315"><enum>(C)</enum><header>Hurricane
Wilma</header><text>In the case of any qualified Hurricane Wilma
individual—</text>
<clause id="id002FA7C9C92D45BC8A45E6DAD1A179F2"><enum>(i)</enum><text>the applicable
period is the period beginning on the date of the enactment of this subsection
and ending on December 31, 2006, and</text>
</clause><clause id="id830FEA8D84D7426983CEA778262BFF02"><enum>(ii)</enum><text>the qualified
beginning date is October 23, 2005.</text>
</clause></subparagraph></paragraph></subsection></section><section id="H3ACBCA0C69984E569356BA77EFFFDE4"><enum>1400R.</enum><header>Employment
relief</header>
<subsection display-inline="no-display-inline" id="HA4ABCEEA0407489FB2A5536B09F12E85"><enum>(a)</enum><header>Employee
retention credit for employers affected by Hurricane Katrina</header>
<paragraph id="H3D374DC4471840B58D960033D185E93B"><enum>(1)</enum><header>In
general</header><text>For purposes of section 38, in the case of an eligible
employer, the Hurricane Katrina employee retention credit for any taxable year
is an amount equal to 40 percent of the qualified wages with respect to each
eligible employee of such employer for such taxable year. For purposes of the
preceding sentence, the amount of qualified wages which may be taken into
account with respect to any individual shall not exceed $6,000.</text>
</paragraph><paragraph id="H62C2F1591072424D94D971992568B448"><enum>(2)</enum><header>Definitions</header><text>For
purposes of this subsection—</text>
<subparagraph id="H96FA750849544D42A10098BB95A95223"><enum>(A)</enum><header>Eligible
employer</header><text>The term <term>eligible employer</term> means any
employer—</text>
<clause id="H44CC3C3078CF4EFEAC38E01C1958F59"><enum>(i)</enum><text>which conducted an
active trade or business on August 28, 2005, in the Gulf Opportunity Zone,
and</text>
</clause><clause id="HD280EDB4994149D0AA67CCCD5CC776E5"><enum>(ii)</enum><text>with respect to
whom the trade or business described in clause (i) is inoperable on any day
after August 28, 2005, and before January 1, 2006, as a result of damage
sustained by reason of Hurricane Katrina.</text>
</clause></subparagraph><subparagraph id="HF4ECF2DCFEAF449EB2C2BA95964151DC"><enum>(B)</enum><header>Eligible
employee</header><text>The term <term>eligible employee</term> means with
respect to an eligible employer an employee whose principal place of employment
on August 28, 2005, with such eligible employer was in the Gulf Opportunity
Zone.</text>
</subparagraph><subparagraph id="HAEA13EE8E74E4A0E8EE8E4415C73C6E8"><enum>(C)</enum><header>Qualified
wages</header><text>The term <term>qualified wages</term> means wages (as
defined in section 51(c)(1), but without regard to section 3306(b)(2)(B)) paid
or incurred by an eligible employer with respect to an eligible employee on any
day after August 28, 2005, and before January 1, 2006, which occurs during the
period—</text>
<clause id="HD1FAE7BDAA604CDAA4ED8DB5F7143757"><enum>(i)</enum><text>beginning on the
date on which the trade or business described in subparagraph (A) first became
inoperable at the principal place of employment of the employee immediately
before Hurricane Katrina, and</text>
</clause><clause id="H9B6DF3AF6BA14219A17C165C80E2C8B5"><enum>(ii)</enum><text>ending on the
date on which such trade or business has resumed significant operations at such
principal place of employment.</text>
</clause><continuation-text continuation-text-level="subparagraph">Such
term shall include wages paid without regard to whether the employee performs
no services, performs services at a different place of employment than such
principal place of employment, or performs services at such principal place of
employment before significant operations have resumed.</continuation-text></subparagraph></paragraph><paragraph id="H75646ECC1CFB4706A9CF180570A7A0F3"><enum>(3)</enum><header>Certain rules to
apply</header><text>For purposes of this subsection, rules similar to the rules
of sections 51(i)(1), 52, and 280C(a) shall apply.</text>
</paragraph><paragraph id="HDD7A1704FA1243C9995C00B0AFB78DED"><enum>(4)</enum><header>Employee not
taken into account more than once</header><text>An employee shall not be
treated as an eligible employee for purposes of this subsection for any period
with respect to any employer if such employer is allowed a credit under section
51 with respect to such employee for such period.</text>
</paragraph></subsection><subsection display-inline="no-display-inline" id="H66248299E4A64B2291EDEA50D2FB84D"><enum>(b)</enum><header>Employee
retention credit for employers affected by Hurricane Rita</header>
<paragraph id="HB0AB3813D0034AA2A95B05AF10056882"><enum>(1)</enum><header>In
general</header><text>For purposes of section 38, in the case of an eligible
employer, the Hurricane Rita employee retention credit for any taxable year is
an amount equal to 40 percent of the qualified wages with respect to each
eligible employee of such employer for such taxable year. For purposes of the
preceding sentence, the amount of qualified wages which may be taken into
account with respect to any individual shall not exceed $6,000.</text>
</paragraph><paragraph id="HDB624CC557B344938050022900A37300"><enum>(2)</enum><header>Definitions</header><text>For
purposes of this subsection—</text>
<subparagraph id="HCBEDFBE91FE04AEDAD1152164F315B6E"><enum>(A)</enum><header>Eligible
employer</header><text>The term <term>eligible employer</term> means any
employer—</text>
<clause id="HDC5A82DFB0AD44FEBCDAB0DDEAE25996"><enum>(i)</enum><text>which conducted an
active trade or business on September 23, 2005, in the Rita GO Zone, and</text>
</clause><clause id="H7CE423A46480486E8C2021377FEB89F1"><enum>(ii)</enum><text>with respect to
whom the trade or business described in clause (i) is inoperable on any day
after September 23, 2005, and before January 1, 2006, as a result of damage
sustained by reason of Hurricane Rita.</text>
</clause></subparagraph><subparagraph id="H570BE383FA9A47D2B0EEE11C5539C4C"><enum>(B)</enum><header>Eligible
employee</header><text>The term <term>eligible employee</term> means with
respect to an eligible employer an employee whose principal place of employment
on September 23, 2005, with such eligible employer was in the Rita GO
Zone.</text>
</subparagraph><subparagraph id="HCF56A3D22F8241EFAC9F79D5D806EB1B"><enum>(C)</enum><header>Qualified
wages</header><text>The term <term>qualified wages</term> means wages (as
defined in section 51(c)(1), but without regard to section 3306(b)(2)(B)) paid
or incurred by an eligible employer with respect to an eligible employee on any
day after September 23, 2005, and before January 1, 2006, which occurs during
the period—</text>
<clause id="H7B886AFC933242D2A3FAACCA059D601"><enum>(i)</enum><text>beginning on the
date on which the trade or business described in subparagraph (A) first became
inoperable at the principal place of employment of the employee immediately
before Hurricane Rita, and</text>
</clause><clause id="H720BDF288FDC40979D42EB3060C43314"><enum>(ii)</enum><text>ending on the
date on which such trade or business has resumed significant operations at such
principal place of employment.</text>
</clause><continuation-text continuation-text-level="subparagraph">Such
term shall include wages paid without regard to whether the employee performs
no services, performs services at a different place of employment than such
principal place of employment, or performs services at such principal place of
employment before significant operations have resumed.</continuation-text></subparagraph></paragraph><paragraph id="HA88FE82A5D514128B8FF2EB62FB62EB7"><enum>(3)</enum><header>Certain rules to
apply</header><text>For purposes of this subsection, rules similar to the rules
of sections 51(i)(1), 52, and 280C(a) shall apply.</text>
</paragraph><paragraph id="HE0E05BA9C737481FBB65FB30F00415C"><enum>(4)</enum><header>Employee not
taken into account more than once</header><text>An employee shall not be
treated as an eligible employee for purposes of this subsection for any period
with respect to any employer if such employer is allowed a credit under
subsection (a) or section 51 with respect to such employee for such
period.</text>
</paragraph></subsection><subsection display-inline="no-display-inline" id="id59AA547114C0426980B37C6D0D18AB65"><enum>(c)</enum><header>Employee
retention credit for employers affected by Hurricane Wilma</header>
<paragraph id="id2CCCCEF47E2C4798852D98896536EDF4"><enum>(1)</enum><header>In
general</header><text>For purposes of section 38, in the case of an eligible
employer, the Hurricane Wilma employee retention credit for any taxable year is
an amount equal to 40 percent of the qualified wages with respect to each
eligible employee of such employer for such taxable year. For purposes of the
preceding sentence, the amount of qualified wages which may be taken into
account with respect to any individual shall not exceed $6,000.</text>
</paragraph><paragraph id="id13E3E14FE7B74FF3AF4511FDF06A9B1A"><enum>(2)</enum><header>Definitions</header><text>For
purposes of this subsection—</text>
<subparagraph id="id99E80895A4AD4AE081E6B7ABAAE44C29"><enum>(A)</enum><header>Eligible
employer</header><text>The term <term>eligible employer</term> means any
employer—</text>
<clause id="id545E51BB87FB4B0AB6C4DDB2A9B0132C"><enum>(i)</enum><text>which conducted
an active trade or business on October 23, 2005, in the Wilma GO Zone,
and</text>
</clause><clause id="idEB9E3B651DFD40A9BC6E21C36FE24EF0"><enum>(ii)</enum><text>with respect to
whom the trade or business described in clause (i) is inoperable on any day
after October 23, 2005, and before January 1, 2006, as a result of damage
sustained by reason of Hurricane Wilma.</text>
</clause></subparagraph><subparagraph id="idAEEE3027B2AB45CF9C797BBAD2E5683D"><enum>(B)</enum><header>Eligible
employee</header><text>The term <term>eligible employee</term> means with
respect to an eligible employer an employee whose principal place of employment
on October 23, 2005, with such eligible employer was in the Wilma GO
Zone.</text>
</subparagraph><subparagraph id="id653B572C75D54659BB430569AD213648"><enum>(C)</enum><header>Qualified
wages</header><text>The term <term>qualified wages</term> means wages (as
defined in section 51(c)(1), but without regard to section 3306(b)(2)(B)) paid
or incurred by an eligible employer with respect to an eligible employee on any
day after October 23, 2005, and before January 1, 2006, which occurs during the
period—</text>
<clause id="idA10F0BB0A2E04245AD15A46928322A63"><enum>(i)</enum><text>beginning on the
date on which the trade or business described in subparagraph (A) first became
inoperable at the principal place of employment of the employee immediately
before Hurricane Wilma, and</text>
</clause><clause id="id9FDAF5865977404AB8AB3A9A4964FB5E"><enum>(ii)</enum><text>ending on the
date on which such trade or business has resumed significant operations at such
principal place of employment.</text>
</clause><continuation-text continuation-text-level="subparagraph">Such
term shall include wages paid without regard to whether the employee performs
no services, performs services at a different place of employment than such
principal place of employment, or performs services at such principal place of
employment before significant operations have resumed.</continuation-text></subparagraph></paragraph><paragraph id="idD85E2A95BD4D4589865EEC5DFF1E459E"><enum>(3)</enum><header>Certain rules
to apply</header><text>For purposes of this subsection, rules similar to the
rules of sections 51(i)(1), 52, and 280C(a) shall apply.</text>
</paragraph><paragraph id="id70A715FC98B44FD68D7F2DF5F690E49C"><enum>(4)</enum><header>Employee not
taken into account more than once</header><text>An employee shall not be
treated as an eligible employee for purposes of this subsection for any period
with respect to any employer if such employer is allowed a credit under
subsection (a) or section 51 with respect to such employee for such
period.</text>
</paragraph></subsection></section><section id="H5E5C72ACC23B4B11AB70135E00A23595"><enum>1400S.</enum><header>Additional
tax relief provisions</header>
<subsection display-inline="no-display-inline" id="H80477CEA64504D959F784FA8D700EE13"><enum>(a)</enum><header>Temporary
suspension of limitations on charitable contributions</header>
<paragraph id="HD5A84F840EC64C779988E4EFB80068C"><enum>(1)</enum><header>In
general</header><text>Except as otherwise provided in paragraph (2), section
170(b) shall not apply to qualified contributions and such contributions shall
not be taken into account for purposes of applying subsections (b) and (d) of
section 170 to other contributions.</text>
</paragraph><paragraph id="H48A7FB8BAEE942EBB70760BE83469101"><enum>(2)</enum><header>Treatment of
excess contributions</header><text>For purposes of section 170—</text>
<subparagraph id="H0D8B52D764D84CD197C0F677EBED6369"><enum>(A)</enum><header>Individuals</header><text>In
the case of an individual—</text>
<clause id="HD4BD7DCC09C34C11A2C01CA01C9F4C27"><enum>(i)</enum><header>Limitation</header><text>Any
qualified contribution shall be allowed only to the extent that the aggregate
of such contributions does not exceed the excess of the taxpayer’s contribution
base (as defined in subparagraph (F) of section 170(b)(1)) over the amount of
all other charitable contributions allowed under section 170(b)(1).</text>
</clause><clause id="HD9FF2932AA6545FA95410575FE235056"><enum>(ii)</enum><header>Carryover</header><text>If
the aggregate amount of qualified contributions made in the contribution year
(within the meaning of section 170(d)(1)) exceeds the limitation of clause (i),
such excess shall be added to the excess described in the portion of
subparagraph (A) of such section which precedes clause (i) thereof for purposes
of applying such section.</text>
</clause></subparagraph><subparagraph id="HE5D4B66F1A044D7B99EB95E593E98700"><enum>(B)</enum><header>Corporations</header><text>In
the case of a corporation—</text>
<clause id="HC1745A3F50524F1FB100F4DD97F4F682"><enum>(i)</enum><header>Limitation</header><text>Any
qualified contribution shall be allowed only to the extent that the aggregate
of such contributions does not exceed the excess of the taxpayer’s taxable
income (as determined under paragraph (2) of section 170(b)) over the amount of
all other charitable contributions allowed under such paragraph.</text>
</clause><clause id="H00EB84F7D68E4DF5A91764ECCDC71E6"><enum>(ii)</enum><header>Carryover</header><text>Rules
similar to the rules of subparagraph (A)(ii) shall apply for purposes of this
subparagraph.</text>
</clause></subparagraph></paragraph><paragraph id="H3899952B4D894E3BBBA87C26354F2718"><enum>(3)</enum><header>Exception to
overall limitation on itemized deductions</header><text>So much of any
deduction allowed under section 170 as does not exceed the qualified
contributions paid during the taxable year shall not be treated as an itemized
deduction for purposes of section 68.</text>
</paragraph><paragraph id="H37A03023A0F548D9B9016DC1D11250C2"><enum>(4)</enum><header>Qualified
contributions</header>
<subparagraph id="H7D23285734FF48E2BE2FCC2E5DE75842"><enum>(A)</enum><header>In
general</header><text>For purposes of this subsection, the term <term>qualified
contribution</term> means any charitable contribution (as defined in section
170(c)) if—</text>
<clause id="H2C7A5EDF69A64BA6A39298AFA3A15558"><enum>(i)</enum><text>such contribution
is paid during the period beginning on August 28, 2005, and ending on December
31, 2005, in cash to an organization described in section 170(b)(1)(A) (other
than an organization described in section 509(a)(3)),</text>
</clause><clause id="H64E8C4AEF76E40878670A45FA5029BB5"><enum>(ii)</enum><text>in the case of a
contribution paid by a corporation, such contribution is for relief efforts
related to Hurricane Katrina, Hurricane Rita, or Hurricane Wilma, and</text>
</clause><clause id="HE293727FCA694A9E80B808EF954949F"><enum>(iii)</enum><text>the taxpayer has
elected the application of this subsection with respect to such
contribution.</text>
</clause></subparagraph><subparagraph id="H64D384074BBA4F1D8545581E8B5DDD12"><enum>(B)</enum><header>Exception</header><text>Such
term shall not include a contribution if the contribution is for establishment
of a new, or maintenance in an existing, segregated fund or account with
respect to which the donor (or any person appointed or designated by such
donor) has, or reasonably expects to have, advisory privileges with respect to
distributions or investments by reason of the donor’s status as a donor.</text>
</subparagraph><subparagraph id="HEA1ACBBABAF74E819639DFCFB86897EB"><enum>(C)</enum><header>Application of
election to partnerships and S corporations</header><text>In the case of a
partnership or S corporation, the election under subparagraph (A)(iii) shall be
made separately by each partner or shareholder.</text>
</subparagraph></paragraph></subsection><subsection display-inline="no-display-inline" id="HEF300520B69147F99225A32817A0291"><enum>(b)</enum><header>Suspension of
certain limitations on personal casualty losses</header><text>Paragraphs (1)
and (2)(A) of section 165(h) shall not apply to losses described in section
165(c)(3)—</text>
<paragraph id="H6785340E3B0B4801B10865590113071C"><enum>(1)</enum><text>which arise in the
Hurricane Katrina disaster area on or after August 25, 2005, and which are
attributable to Hurricane Katrina,</text>
</paragraph><paragraph id="HA637F6D5D9294DDA99A66D81691074E2"><enum>(2)</enum><text display-inline="yes-display-inline">which arise in the Hurricane Rita disaster
area on or after September 23, 2005, and which are attributable to Hurricane
Rita, or</text>
</paragraph><paragraph id="id41E1925DF19A49D785A8EFAFE442804D"><enum>(3)</enum><text display-inline="yes-display-inline">which arise in the Hurricane Wilma disaster
area on or after October 23, 2005, and which are attributable to Hurricane
Wilma.</text>
</paragraph><continuation-text continuation-text-level="subsection">In the
case of any other losses, section 165(h)(2)(A) shall be applied without regard
to the losses referred to in the preceding
sentence.</continuation-text></subsection></section><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="H7D9DB05B4C8A4F1F980023BC50519834"><enum>(b)</enum><header>Conforming
amendments</header>
<paragraph id="H032EFA7463414C108200E56DDA01FE4D"><enum>(1)</enum><text>Subsection (b) of
section 38 is amended by striking <quote>and</quote> at the end of paragraph
(25), by striking the period at the end of paragraph (26) and inserting a
comma, and by adding at the end the following new paragraphs:</text>
<quoted-block display-inline="no-display-inline" id="H9DFA1E67044C42F68360D2A04D1E7253" style="OLC">
<paragraph id="H8E765462DA934C2E986EE82741CE7030"><enum>(27)</enum><text>the Hurricane
Katrina employee retention credit determined under section 1400R(a),</text>
</paragraph><paragraph commented="no" display-inline="no-display-inline" id="id8FB29E9C01C04EEB8D4B470052ED2ED7"><enum>(28)</enum><text display-inline="yes-display-inline">the Hurricane Rita employee retention
credit determined under section 1400R(b), and</text>
</paragraph><paragraph id="H4B5CD1202CAB424985DC6200343B73CC"><enum>(29)</enum><text>the Hurricane
Wilma employee retention credit determined under section
1400R(c).</text>
</paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph><paragraph id="HF80A45C788444040A1653DBF8A75D09"><enum>(2)</enum><text>The table of
sections for subchapter Z of chapter 1 is amended by adding at the end the
following new items:</text>
<quoted-block display-inline="no-display-inline" id="id11B73AA9341E4E2DA4A724FE04EBCFE8" style="OLC">
<toc container-level="quoted-block-container" idref="HE90F1A49CC274E97811B1DB3FA248B0" lowest-bolded-level="division-lowest-bolded" lowest-level="section" quoted-block="no-quoted-block" regeneration="yes-regeneration">
<toc-entry level="section">Sec. 1400P. Special rules for mortgage
revenue bonds.</toc-entry>
<toc-entry level="section">Sec. 1400Q. Special rules for use of
retirement funds.</toc-entry>
<toc-entry idref="H3ACBCA0C69984E569356BA77EFFFDE4" level="section">Sec. 140RQ. Employment relief.</toc-entry>
<toc-entry idref="H5E5C72ACC23B4B11AB70135E00A23595" level="section">Sec. 1400S. Additional tax relief
provisions.</toc-entry>
</toc>
<after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph><paragraph id="HE69DB9E5EA6A4BB8A1714D56F6AA0015"><enum>(3)</enum><text>The following
provisions of the Katrina Emergency Tax Relief Act of 2005 are hereby
repealed:</text>
<subparagraph id="H31EE981F652A42C9B33843003980CB31"><enum>(A)</enum><text>Title I.</text>
</subparagraph><subparagraph commented="no" display-inline="no-display-inline" id="H071CAE9BCCE449FC9B95C16FED9B37B5"><enum>(B)</enum><text>Sections 202, 301,
and 402.</text>
</subparagraph></paragraph></subsection></section></subtitle><enum>II</enum><header>Extension of
expiring provisions</header>
<subtitle id="idC2D408234ED2497B992B7A9036E259D1"><enum>A</enum><header>Multi-year
extensions</header>
<section id="IDCE85AC2AA8DC45D5989980F91CCB5827"><enum>201.</enum><header>Extension of
increased expensing for small business</header><text display-inline="no-display-inline">Section 179 is amended by striking
<quote>2008</quote> each place it appears and inserting
<quote>2010</quote>.</text>
</section><section id="idBA53EFAAC3624D17A6C670441314E8E7"><enum>202.</enum><header>Credit for
elective deferrals and IRA contributions</header><text display-inline="no-display-inline">Section 25B(h) is amended by striking
<quote>2006</quote> and inserting <quote>2009</quote>.</text>
</section><section id="idEB1B7D45F6674523AD9C17D34B628070"><enum>203.</enum><header>Above-the-line
deduction for higher education</header>
<subsection id="idD6DC850C2F5B4C3C809CB139F52A3031"><enum>(a)</enum><header>In
general</header><text display-inline="yes-display-inline">Section 222(e) is
amended by striking <quote>2005</quote>and inserting
<quote>2009</quote>.</text>
</subsection><subsection id="idDD052AC55CCE47C489B58FE2DE743F7A"><enum>(b)</enum><header>Conforming
amendments</header><text display-inline="yes-display-inline">Section
222(b)(2)(B) is amended—</text>
<paragraph id="id9098A7ACC7B8417FB6C4C4B035A5E950"><enum>(1)</enum><text display-inline="yes-display-inline">by striking <quote>a taxable year beginning
in 2004 or 2005</quote> and inserting <quote>any taxable year beginning after
2003</quote>, and</text>
</paragraph><paragraph id="id21338388B502469DAF335E8075845539"><enum>(2)</enum><text>by striking
<quote><header-in-text level="subparagraph" style="OLC">2004 and
2005</header-in-text></quote> and inserting <quote><header-in-text level="subparagraph" style="OLC">After 2003</header-in-text></quote>.</text>
</paragraph></subsection></section><section id="idA565B81ECCC2487FB90EAA7A4C597A30"><enum>204.</enum><header>Extension and
modification of new markets tax credit</header>
<subsection id="idDE6C4330A3E8497AA40D91BD2A0D6D72"><enum>(a)</enum><header>Extension</header><text display-inline="yes-display-inline">Section 45D(f)(1)(D) is amended by striking
<quote>and 2007</quote> and inserting <quote>, 2007, and 2008</quote>.</text>
</subsection><subsection id="id387FA879D3E440F5B5E779972EB345C7"><enum>(b)</enum><header>Regulations
regarding non-metropolitan counties</header><text>Section 45D(i) is amended by
striking <quote>and</quote> at the end of paragraph (4), by striking the period
at the end of paragraph (5) and inserting <quote>, and</quote>, and by adding
at the end by the following new paragraph:</text>
<quoted-block display-inline="no-display-inline" id="idDEBB3E77A4554D8BBD9DB1060DA3CE44" style="OLC">
<paragraph id="id3B40A3EF264A4D8A8774016A3CA8946A"><enum>(6)</enum><text>which ensure that
non-metropolitan counties receive a proportional allocation of qualified equity
investments.</text>
</paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection></section></subtitle><subtitle id="id61057BE5FC784F759B12DDB0300B462E"><enum>B</enum><header>One-year
extensions</header>
<section id="id39BFBD47F16648099A2651EAB297DE7C"><enum>211.</enum><header>Election to
deduct State and local general sales taxes</header><text display-inline="no-display-inline">Section 164(b)(5)(I) is amended by striking
<quote>2006</quote> and inserting <quote>2007</quote>.</text>
</section><section id="ID05AA81C760414E3686535BDA2A25683E"><enum>212.</enum><header>Extension of
alternative minimum tax exemption amount for individuals</header>
<subsection id="id1FF5A1A51552495D9A8EA1505C83313E"><enum>(a)</enum><header>In
general</header><text display-inline="yes-display-inline">Subparagraphs (A) and
(B) of section 55(d)(1) are each amended by striking <quote>and 2005</quote>
and inserting <quote>2005, and 2006</quote>.</text>
</subsection><subsection id="id016360DE149743D6BDB0209DFFE69672"><enum>(b)</enum><header>Inflation
adjustment for 2006</header><text>Section 55(d) is amended by adding at the end
the following new paragraph:</text>
<quoted-block display-inline="no-display-inline" id="idE6D544FF1E884D91A7958BDC0DECB000" style="OLC">
<paragraph id="ID98629E0B984243A4B14B578F3F96B500"><enum>(4)</enum><header>Inflation
adjustment</header><text>In the case of any taxable year beginning in calendar
year 2006, the $58,000 and $40,250 amounts contained in subparagraphs (A) and
(B) of paragraph (1) shall be increased by an amount equal to—</text>
<subparagraph id="ID316ACB2E2E94434CB3267CE97FD1F13E"><enum>(A)</enum><text>such dollar
amount, multiplied by</text>
</subparagraph><subparagraph id="IDA4644C8B8BFE4E17974F0991EF53E689"><enum>(B)</enum><text>the
cost-of-living adjustment determined under section 1(f)(3) for the calendar
year in which the taxable year begins, determined by substituting
<quote>calendar year 2004</quote> for <quote>calendar year 1992</quote> in
subparagraph (B) thereof.</text>
</subparagraph><continuation-text continuation-text-level="paragraph">Any
increase determined under the preceding sentence shall be rounded to the
nearest multiple of
$50.</continuation-text></paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection></section><section id="ID342D3BCB01524339A267AAE493EAF0F8"><enum>213.</enum><header>Allowance of
nonrefundable personal credits against regular and alternative minimum tax
liability</header>
<subsection id="ID7D0B410EEA7C46609B5A0B5E3EE4E9A2"><enum>(a)</enum><header>In
general</header><text>Paragraph (2) of section 26(a) is amended—</text>
<paragraph id="ID1B3B4272A59D45CB99A3E540941990A1"><enum>(1)</enum><text>by striking
<quote><header-in-text level="paragraph" style="OLC">2005</header-in-text></quote> in the heading and inserting
<quote><header-in-text level="paragraph" style="OLC">2006</header-in-text></quote>, and</text>
</paragraph><paragraph id="ID76E26D7C004D4AA39FA921EA4BAC1C03"><enum>(2)</enum><text>by striking
<quote>or 2005</quote> and inserting <quote>2005, or 2006</quote>.</text>
</paragraph></subsection><subsection id="ID32243E92D5E24487AABC81410D90F3DA"><enum>(b)</enum><header>Conforming
provisions</header>
<paragraph id="ID4f621c5644cc453dad8f90587d962c80"><enum>(1)</enum><text>Section 30B(g) is
amended by adding at the end the following new paragraph:</text>
<quoted-block display-inline="no-display-inline" id="idC5EF4479DFEB447DB1C72F72D9835DA5" style="OLC">
<paragraph id="IDfc6f451a97dd4310a9002e68b7395483"><enum>(3)</enum><header>Special rule
for 2006</header><text>For purposes of any taxable year beginning during 2006,
the credit allowed under subsection (a) (after the application of paragraph
(1)) shall not exceed the excess of—</text>
<subparagraph id="ID7badb8bd3a0f48a686b0c66a766710fa"><enum>(A)</enum><text>the sum of the
regular tax liability (as defined in section 26(b)) plus the tax imposed by
section 55, over</text>
</subparagraph><subparagraph id="ID24a5a4f155b94fc685ac24760cc060c1"><enum>(B)</enum><text>the sum of the
credits allowable under subpart A and this subpart (other than this section and
section
30C).</text>
</subparagraph></paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph><paragraph id="IDd4451ee55d8548af888292399e06c0a7"><enum>(2)</enum><text>Section 30C(d) is
amended by adding at the end the following new paragraph:</text>
<quoted-block display-inline="no-display-inline" id="idB3DBA012EDDC48DCB58E984359051F5C" style="OLC">
<paragraph id="ID0865d48def234138bc1150d0edc3cbc2"><enum>(3)</enum><header>Special rule
for 2006</header><text>For purposes of any taxable year beginning during 2006,
the credit allowed under subsection (a) (after the application of paragraph
(1)) shall not exceed the excess of—</text>
<subparagraph id="ID43a55d286e0a44f581e9a0140e341efa"><enum>(A)</enum><text>the sum of the
regular tax liability (as defined in section 26(b)) plus the tax imposed by
section 55, over</text>
</subparagraph><subparagraph id="IDdcf136f1c2334d3685ec8d6ef7962261"><enum>(B)</enum><text>the sum of the
credits allowable under subpart A and this subpart (other than this
section).</text>
</subparagraph></paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph><paragraph id="ID45E913CE26B144ED850E526B362B4727"><enum>(3)</enum><text>Section 904(h) is
amended by striking <quote>or 2005</quote> and inserting <quote>2005, or
2006</quote>.</text>
</paragraph><paragraph id="IDA20BC84CD7734B019E30B3DCA6A73D6E"><enum>(4)</enum><text>The amendments
made by sections 201(b), 202(f), and 618(b) of the Economic Growth and Tax
Relief Reconciliation Act of 2001 shall not apply to taxable years beginning
during 2006.</text>
</paragraph></subsection></section><section id="idF8E7AD25C3684235A368F97DF6CAF423"><enum>214.</enum><header>Extension and
modification of research credit</header>
<subsection id="id80C6E824090D4D8D8A84ABE2C264E0C7"><enum>(a)</enum><header>Extension</header>
<paragraph id="id5C92177FB1614333825889925D0C02E8"><enum>(1)</enum><header>In
general</header><text>Section 41(h)(1)(B) is amended by striking
<quote>2005</quote> and inserting <quote>2006</quote>.</text>
</paragraph><paragraph commented="no" display-inline="no-display-inline" id="id7354C25A6AA94DE28CDDE1663FE3E5C3"><enum>(2)</enum><header>Conforming
amendment</header><text>Section 45C(b)(1)(D) is amended by striking
<quote>2005</quote> and inserting <quote>2006</quote>.</text>
</paragraph></subsection><subsection id="IDA8735ECAFC8A43F9009BF7C33F38177F"><enum>(b)</enum><header>Increase in
rates of alternative incremental credit</header><text>Subparagraph (A) of
section 41(c)(4) (relating to election of alternative incremental credit) is
amended—</text>
<paragraph id="IDD695C239D57A4079AD4FFB871DB333F2"><enum>(1)</enum><text>by striking
<quote>2.65 percent</quote> and inserting <quote>3 percent</quote>,</text>
</paragraph><paragraph id="ID3AA55CA8805F49E7A623C2735DB1D726"><enum>(2)</enum><text>by striking
<quote>3.2 percent</quote> and inserting <quote>4 percent</quote>, and</text>
</paragraph><paragraph id="IDB14E34D7B0784E5F9017014678E6002B"><enum>(3)</enum><text>by striking
<quote>3.75 percent</quote> and inserting <quote>5 percent</quote>.</text>
</paragraph></subsection><subsection id="ID80E1B8EC242D482F84621FA5607317AD"><enum>(c)</enum><header>Alternative
simplified credit for qualified research expenses</header>
<paragraph id="IDAC968D63E3FC4CD2998F02009FA0DAA8"><enum>(1)</enum><header>In
general</header><text>Subsection (c) of section 41 (relating to base amount) is
amended by redesignating paragraphs (5) and (6) as paragraphs (6) and (7),
respectively, and by inserting after paragraph (4) the following new
paragraph:</text>
<quoted-block id="ID7792F44B4F3941F4AC00E2B93C785330">
<paragraph id="ID9A166D75272B41568D88388454D05EA2"><enum>(5)</enum><header>Election of
alternative simplified credit</header>
<subparagraph id="IDE3E5D322494D43849F691DD8EA575039"><enum>(A)</enum><header>In
general</header><text>At the election of the taxpayer, the credit determined
under subsection (a)(1) shall be equal to 12 percent of so much of the
qualified research expenses for the taxable year as exceeds 50 percent of the
average qualified research expenses for the 3 taxable years preceding the
taxable year for which the credit is being determined.</text>
</subparagraph><subparagraph id="ID9A276869B4504923B9929481D7489094"><enum>(B)</enum><header>Special rule in
case of no qualified research expenses in any of 3 preceding taxable
years</header>
<clause id="IDA4600165AD3D421693BD4F70D1642CC0"><enum>(i)</enum><header>Taxpayers to
which subparagraph applies</header><text>The credit under this paragraph shall
be determined under this subparagraph if the taxpayer has no qualified research
expenses in any 1 of the 3 taxable years preceding the taxable year for which
the credit is being determined.</text>
</clause><clause id="IDA8228C65482E4DAB966FC72676740007"><enum>(ii)</enum><header>Credit
rate</header><text>The credit determined under this subparagraph shall be equal
to 6 percent of the qualified research expenses for the taxable year.</text>
</clause></subparagraph><subparagraph id="ID44AD7F7EB4A7471800B94EEFA5CAF250"><enum>(C)</enum><header>Election</header><text>An
election under this paragraph shall apply to the taxable year for which made
and all succeeding taxable years unless revoked with the consent of the
Secretary. An election under this paragraph may not be made for any taxable
year to which an election under paragraph (4)
applies.</text>
</subparagraph></paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph><paragraph id="IDA0FEF7D7301E4C74B5B6BB114D328BAC"><enum>(2)</enum><header>Coordination
with election of alternative incremental credit</header>
<subparagraph id="IDCAB3A0F37B914F6DB921000225D2B8F9"><enum>(A)</enum><header>In
general</header><text>Section 41(c)(4)(B) (relating to election) is amended by
adding at the end the following: <quote>An election under this paragraph may
not be made for any taxable year to which an election under paragraph (5)
applies.</quote>.</text>
</subparagraph><subparagraph id="ID014AE02CBF8E405389929571746B3371"><enum>(B)</enum><header>Transition
rule</header><text>In the case of an election under section 41(c)(4) of the
Internal Revenue Code of 1986 which applies to the taxable year which includes
the date of the enactment of this Act, such election shall be treated as
revoked with the consent of the Secretary of the Treasury if the taxpayer makes
an election under section 41(c)(5) of such Code (as added by subsection (a))
for such year.</text>
</subparagraph></paragraph></subsection><subsection id="id2A8D09B822F54244AA139962D8554858"><enum>(d)</enum><header>Funded
research</header><text>Subparagraph (H) of section 41(d)(4) is amended to read
as follows:</text>
<quoted-block display-inline="no-display-inline" id="idBADBB60F36674A96BA3137C69C484217" style="OLC">
<subparagraph id="idE1CCA3F6D4B542CC85511D3A37E3D2E2"><enum>(H)</enum><header>Funded
research</header>
<clause id="idE1FEA14582F34E7496A456F88A0243F1"><enum>(i)</enum><header>In
general</header><text>Any funded research.</text>
</clause><clause id="id52E4D9CDCC714FD188CD302A2650A11E"><enum>(ii)</enum><header>Funded
research</header><text>For purposes of clause (i), the term <term>funded
research</term> means any research to the extent funded by any grant, contract,
or otherwise—</text>
<subclause id="id4B7EA18C77C14D63BE252B9BB64AF1EE"><enum>(I)</enum><text>by another
person, or</text>
</subclause><subclause id="id497F68B1E78F4A6F953F8BB5FE8B998B"><enum>(II)</enum><text>by any
governmental entity.</text>
</subclause></clause><clause id="id80A90F705F27400BA8174EC37427E5B6"><enum>(iii)</enum><header>Treatment of
payments under government contracts</header><text>For purposes of determining
the amount of funding of research under any government contract, all payments
under such contract shall be taken into account, including all payments under
any subcontracting agreement or similar contract which includes funding for
research which would be treated as funded by a governmental entity if under the
prime contract.</text>
</clause><clause id="idDB520F0F1A4E465797872919406AC0F5"><enum>(iv)</enum><header>Exception for
government contracts containing no new and significant performance
specifications</header>
<subclause id="idDA43AEDFB03845E4994CC63B17EE147A"><enum>(I)</enum><header>In
general</header><text>Clause (iii) shall not apply with respect to any
government contract containing no new and significant performance
specifications, except if the contractor does not retain substantial rights to
the research.</text>
</subclause><subclause id="id797C0F2B676942D8AFDE66F93B92F8D8"><enum>(II)</enum><header>Treatment of
contract</header><text>For purposes of subclause (I), no contract shall be
treated as having new and significant performance specifications if the
contractor reasonably expects that the costs of all qualified research
(including costs reasonably expected to be incurred by subcontractors and
independent contractors) will not exceed 10 percent of the total costs of
performing under the contract.</text>
</subclause><subclause id="id7EAE44ED0C184AAF925ECEB591B7C480"><enum>(III)</enum><header>Treatment as
separate contracts</header><text>For purposes of subclause (II), options under
a contract which may be exercised at the discretion of the governmental unit
shall be treated as separate contracts.</text>
</subclause></clause><clause id="idFE0E952A88894BFAA6D848A71B3E0D46"><enum>(v)</enum><header>Incidental
research</header><text>Clause (iii) shall not apply to any research undertaken
by any government contractor unless the research is required to meet the
contract's performance
specifications.</text>
</clause></subparagraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection commented="no" display-inline="no-display-inline" id="id3F6555421ECD455B8887A5A2213BC690"><enum>(e)</enum><header>Effective
date</header><text>The amendments made by this section shall apply to taxable
years ending after December 31, 2005.</text>
</subsection></section><section id="ID9DA9D02316A8476A98592570B6604602"><enum>215.</enum><header>Work
Opportunity Tax credit and Welfare-to-Work credit</header>
<subsection id="IDB8C8E1F5A7964BF2A9CA433431BF0011"><enum>(a)</enum><header>In
general</header><text>Section 51(c)(4)(B) is amended by striking
<quote>2005</quote> and inserting <quote>2006</quote>.</text>
</subsection><subsection id="ID5EF969C57F9C4C58902F39F6C1C07B72"><enum>(b)</enum><header>Eligibility of
ex-felons determined without regard to family income</header><text>Paragraph
(4) of section 51(d) is amended by adding <quote>and</quote> at the end of
subparagraph (A), by striking <quote>, and</quote> at the end of subparagraph
(B) and inserting a period, and by striking all that follows subparagraph
(B).</text>
</subsection><subsection id="ID4450B8C109D34243B746A44B75218505"><enum>(c)</enum><header>Increase in
maximum age for eligibility of food stamp recipients</header><text>Clause (i)
of section 51(d)(8)(A) is amended by striking <quote>25</quote> and inserting
<quote>40</quote>.</text>
</subsection><subsection id="ID7BA44987B350467298425DCEC4D722DD"><enum>(d)</enum><header>Increase in
maximum age for designated community residents</header>
<paragraph id="IDDEDF96F6ED4549CAB3E2C700FB1F4DB5"><enum>(1)</enum><header>In
general</header><text>Paragraph (5) of section 51(d) is amended to read as
follows:</text>
<quoted-block id="ID66356B3F18624A80A44F933815A0A0BB">
<paragraph id="IDE390A6242BF7453E92C4DE9E1777803D"><enum>(5)</enum><header>Designated
community residents</header>
<subparagraph id="IDF234EBD2865A4FE28097C200A69F8FFE"><enum>(A)</enum><header>In
general</header><text>The term <term>designated community resident</term> means
any individual who is certified by the designated local agency—</text>
<clause id="ID8A23890AB623490E99BEA5E0E8E9C8CC"><enum>(i)</enum><text>as having
attained age 18 but not age 40 on the hiring date, and</text>
</clause><clause id="ID696F54AE763E41580072F7B36237F154"><enum>(ii)</enum><text>as having his
principal place of abode within an empowerment zone, enterprise community, or
renewal community.</text>
</clause></subparagraph><subparagraph id="ID5CE466A80EF548289395E1007BD28551"><enum>(B)</enum><header>Individual must
continue to reside in zone or community</header><text>In the case of a
designated community resident, the term <term>qualified wages</term> shall not
include wages paid or incurred for services performed while the individual’s
principal place of abode is outside an empowerment zone, enterprise community,
or renewal community.</text>
</subparagraph></paragraph><after-quoted-block></after-quoted-block></quoted-block>
</paragraph><paragraph id="ID8EE91A652AA14CFC8086703BB5AEC8D9"><enum>(2)</enum><header>Conforming
amendment</header><text>Subparagraph (D) of section 51(d)(1) is amended to read
as follows:</text>
<quoted-block id="IDE9C421ACB00142F3B8A752D3E2C287FD">
<subparagraph id="ID87E735A0AACA40EEB020A7DBC38D0052"><enum>(D)</enum><text>a designated
community
resident,</text>
</subparagraph><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph></subsection><subsection id="IDCBCA585639114CD198C221E51C9F7BFD"><enum>(e)</enum><header>Consolidation
of work opportunity credit with welfare-to-work credit</header>
<paragraph id="ID4234257B922E420F9E29002FB25C2850"><enum>(1)</enum><header>In
general</header><text>Paragraph (1) of section 51(d) is amended by striking
<quote>or</quote> at the end of subparagraph (G), by striking the period at the
end of subparagraph (H) and inserting <quote>, or</quote>, and by adding at the
end the following new subparagraph:</text>
<quoted-block id="IDECBF848FC70C4E319B00EFE7340075D5">
<subparagraph id="ID8E0C3E56C21D447CAC223F1640015226"><enum>(I)</enum><text>a long-term
family assistance recipient.</text>
</subparagraph><after-quoted-block></after-quoted-block></quoted-block>
</paragraph><paragraph id="IDD8EF24D98D8F4123BD6D533B37A22937"><enum>(2)</enum><header>Long-term
family assistance recipient</header><text>Subsection (d) of section 51 is
amended by redesignating paragraphs (10) through (12) as paragraphs (11)
through (13), respectively, and by inserting after paragraph (9) the following
new paragraph:</text>
<quoted-block id="IDC8EABDAB73134FD58CFED8791928B202">
<paragraph id="ID3234BAAF50104A19A401975BE782DCAC"><enum>(10)</enum><header>Long-term
family assistance recipient</header><text>The term <term>long-term family
assistance recipient</term> means any individual who is certified by the
designated local agency—</text>
<subparagraph id="ID5E90C334F6F64B49A9007795A5C74F8B"><enum>(A)</enum><text>as being a member
of a family receiving assistance under a IV–A program (as defined in paragraph
(2)(B)) for at least the 18-month period ending on the hiring date,</text>
</subparagraph><subparagraph id="IDF6F55EA7ADED45269877F0ADE31CD010"><enum>(B)</enum><clause commented="no" display-inline="yes-display-inline" id="ID26CD264AC0DE4125B3A64790EF78E212"><enum>(i)</enum><text>as being a member of a
family receiving such assistance for 18 months beginning after August 5, 1997,
and</text>
</clause><clause id="ID9EC4EAB5B5D44A5BAB4E3106B538F9BA" indent="up1"><enum>(ii)</enum><text>as having a hiring date which is
not more than 2 years after the end of the earliest such 18-month period,
or</text>
</clause></subparagraph><subparagraph id="ID558464C91A7244E900D12186E8222632"><enum>(C)</enum><clause commented="no" display-inline="yes-display-inline" id="IDB843CB84BECF4C8AA8B51992D87C7501"><enum>(i)</enum><text>as being a member of a
family which ceased to be eligible for such assistance by reason of any
limitation imposed by Federal or State law on the maximum period such
assistance is payable to a family, and</text>
</clause><clause id="ID58A706A5661E426CBA4DDADF44FFEE85" indent="up1"><enum>(ii)</enum><text>as having a hiring date which is
not more than 2 years after the date of such
cessation.</text>
</clause></subparagraph></paragraph><after-quoted-block></after-quoted-block></quoted-block>
</paragraph><paragraph id="IDCBEC29D73C384DD6BBFACA23A9003816"><enum>(3)</enum><header>Increased
credit for employment of long-term family assistance
recipients</header><text>Section 51 is amended by inserting after subsection
(d) the following new subsection:</text>
<quoted-block id="ID16F3DF6A74774B91A5BBCD68F224A4D9">
<subsection id="IDC50C3B8F805749FAB44BBA4FA6A0AB1D"><enum>(e)</enum><header>Credit for
second-year wages for employment of long-term family assistance
recipients</header>
<paragraph id="IDECC11602105D4337BC3989255BAB0550"><enum>(1)</enum><header>In
general</header><text>With respect to the employment of a long-term family
assistance recipient—</text>
<subparagraph id="IDA1DF4BA917B44479A0F4F851D7ED1E09"><enum>(A)</enum><text>the amount of the
work opportunity credit determined under this section for the taxable year
shall include 50 percent of the qualified second-year wages for such year,
and</text>
</subparagraph><subparagraph id="ID33BAB1B73E57452DB9DE8FBCEAC59128"><enum>(B)</enum><text>in lieu of
applying subsection (b)(3), the amount of the qualified first-year wages, and
the amount of qualified second-year wages, which may be taken into account with
respect to such a recipient shall not exceed $10,000 per year.</text>
</subparagraph></paragraph><paragraph id="ID9D4B00D21FF34DB38F2804CDB1B8DCBE"><enum>(2)</enum><header>Qualified
second-year wages</header><text>For purposes of this subsection, the term
<term>qualified second-year wages</term> means qualified wages—</text>
<subparagraph id="ID2F16A177DB674B80BD808CF3EDB8A107"><enum>(A)</enum><text>which are paid to
a long-term family assistance recipient, and</text>
</subparagraph><subparagraph id="IDC439C73115384228A4A0671392B64550"><enum>(B)</enum><text>which are
attributable to service rendered during the 1-year period beginning on the day
after the last day of the 1-year period with respect to such recipient
determined under subsection (b)(2).</text>
</subparagraph></paragraph><paragraph id="ID80AED8923AF94AE8A7E903FD4D9C4BE0"><enum>(3)</enum><header>Special rules
for agricultural and railway labor</header><text>If such recipient is an
employee to whom subparagraph (A) or (B) of subsection (h)(1) applies, rules
similar to the rules of such subparagraphs shall apply except that—</text>
<subparagraph id="ID74ADE549D648432AA1D1D32E18EEE53D"><enum>(A)</enum><text>such subparagraph
(A) shall be applied by substituting <quote>$10,000</quote> for
<quote>$6,000</quote>, and</text>
</subparagraph><subparagraph id="IDBF1243BA12CE42668B6992044C42D5C2"><enum>(B)</enum><text>such subparagraph
(B) shall be applied by substituting <quote>$833.33</quote> for
<quote>$500</quote>.</text>
</subparagraph></paragraph></subsection><after-quoted-block></after-quoted-block></quoted-block>
</paragraph><paragraph id="IDFEA3999E935D4C97000315418E555D89"><enum>(4)</enum><header>Repeal of
separate welfare-to-work credit</header>
<subparagraph id="ID7AB9E946F2FE460BB2DDDBB48D20C2E8"><enum>(A)</enum><header>In
general</header><text>Section 51A is hereby repealed.</text>
</subparagraph><subparagraph id="IDED503CCBCED64B818D67A3987213747C"><enum>(B)</enum><header>Clerical
amendment</header><text>The table of sections for subpart F of part IV of
subchapter A of chapter 1 is amended by striking the item relating to section
51A.</text>
</subparagraph></paragraph></subsection><subsection commented="no" display-inline="no-display-inline" id="ID2E506C6BBEEF478A8B8150DDB3DA7BE5"><enum>(f)</enum><header>Effective
date</header><text>The amendments made by this section shall apply to
individuals who begin work for the employer after December 31, 2005.</text>
</subsection></section><section id="IDEEBB7F64ED3A4F3C8627E343DBD64CE7"><enum>216.</enum><header>Qualified zone
academy bonds</header>
<subsection id="IDF6330EA9805247AEAF7A3B8435BB3C04"><enum>(a)</enum><header>In
general</header><text>Paragraph (1) of section 1397E(e) is amended by striking
<quote>and 2005</quote> and inserting <quote>2005, and 2006</quote>.</text>
</subsection><subsection id="id93BEA5E684C0426A8EBE250A8B855170"><enum>(b)</enum><header>Form of private
business contributions</header><text>Section 1397E(d)(2)(B) is amended by
striking <quote>any contribution</quote> and all that follows and inserting
<quote>any cash or cash equivalent contribution</quote>.</text>
</subsection><subsection id="id19DE4CCED8E04D598793A745B53EC497"><enum>(c)</enum><header>Special rules
relating to amortization, expenditures, arbitrage, and reporting</header>
<paragraph id="id3DD4AC49AB184D2CADB0261293F94821"><enum>(1)</enum><header>In
general</header><text>Section 1397E is amended—</text>
<subparagraph id="idE0BED454B0784B25B2AE00C649A0781C"><enum>(A)</enum><text>in subsection
(d)(1), by striking <quote>and</quote> at the end of subparagraph (C)(iii), by
striking the period at the end of subparagraph (D) and inserting <quote>,
and</quote>, and by adding at the end the following new subparagraph:</text>
<quoted-block display-inline="no-display-inline" id="id2064D152030B484789C6F49A23D4564D" style="OLC">
<subparagraph id="id44315433976F470AB25C073A34CF27EB"><enum>(E)</enum><text>the issue meets
the requirements of subsections (f), (g), (h), and
(i).</text>
</subparagraph><after-quoted-block>,
and</after-quoted-block></quoted-block>
</subparagraph><subparagraph id="id9626726AD5C84967BFB36886721F8246"><enum>(B)</enum><text>by redesignating
subsections (f), (g), (h), and (i) as subsection (j), (k), (l), and (m),
respectively, and by inserting after subsection (e) the following new
subsections:</text>
<quoted-block display-inline="no-display-inline" id="id8D098DDA905F4807A59EDF0836F90257" style="OLC">
<subsection id="ID34A39C4C88F84FE7A502147AC9801E88"><enum>(f)</enum><header>Ratable
principal amortization required</header><text>An issue shall be treated as
meeting the requirements of this subsection if such issue provides for an equal
amount of principal to be paid by the issuer during each calendar year that the
issue is outstanding.</text>
</subsection><subsection id="IDDA3AD1D2210948318724010E4FA9B463"><enum>(g)</enum><header>Special rules
relating to expenditures</header>
<paragraph id="ID808B966DB3E14F56968E1800CBF43066"><enum>(1)</enum><header>In
general</header><text>An issue shall be treated as meeting the requirements of
this subsection if, as of the date of issuance, the issuer reasonably
expects—</text>
<subparagraph id="ID9BABCD72D0AD4E45837E3FD91B620663"><enum>(A)</enum><text>at least 95
percent of the proceeds from the sale of the issue are to be spent for 1 or
more qualified purposes with respect to qualified zone academies within the
5-year period beginning on the date of issuance of the qualified zone academy
bond,</text>
</subparagraph><subparagraph id="ID8D6E1883BD3B4F308F6F0002F5CEFE46"><enum>(B)</enum><text>a binding
commitment with a third party to spend at least 10 percent of the proceeds from
the sale of the issue will be incurred within the 6-month period beginning on
the date of issuance of the qualified zone academy bond, and</text>
</subparagraph><subparagraph id="ID2E716AA22F4F47929F872F5DC1E05E5C"><enum>(C)</enum><text>such purposes
will be completed with due diligence and the proceeds from the sale of the
issue will be spent with due diligence.</text>
</subparagraph></paragraph><paragraph id="ID3528CEB90749434C9E169D83D854E087"><enum>(2)</enum><header>Extension of
period</header><text>Upon submission of a request prior to the expiration of
the period described in paragraph (1)(A), the Secretary may extend such period
if the issuer establishes that the failure to satisfy the 5-year requirement is
due to reasonable cause and the related purposes will continue to proceed with
due diligence.</text>
</paragraph><paragraph id="IDD3D76384B1824995AE8C5CE25CF86178"><enum>(3)</enum><header>Failure to
spend required amount of bond proceeds within 5 years</header><text>To the
extent that less than 95 percent of the proceeds of such issue are expended by
the close of the 5-year period beginning on the date of issuance (or if an
extension has been obtained under paragraph (2), by the close of the extended
period), the issuer shall redeem all of the nonqualified bonds within 90 days
after the end of such period. For purposes of this paragraph, the amount of the
nonqualified bonds required to be redeemed shall be determined in the same
manner as under section 142.</text>
</paragraph></subsection><subsection id="IDBDB4103B1B46434FBA4F6D12603D18E0"><enum>(h)</enum><header>Special rules
relating to arbitrage</header><text>An issue shall be treated as meeting the
requirements of this subsection if the issuer satisfies the arbitrage
requirements of section 148 with respect to proceeds of the issue.</text>
</subsection><subsection id="idF3A3369BA7EB425DA4482BECEC58F4DC"><enum>(i)</enum><header>Reporting</header><text>Issuers
of qualified academy zone bonds shall submit reports similar to the reports
required under section
149(e).</text>
</subsection><after-quoted-block>.</after-quoted-block></quoted-block>
</subparagraph></paragraph><paragraph id="id005EB4055037412E878DD95C61E3CDEA"><enum>(2)</enum><header>Conforming
amendments</header>
<subparagraph id="id3761E2563D7E4E499B08ADF026E4DB3F"><enum>(A)</enum><text>Section
1397E(d)(3) is amended by inserting <quote>without regard to the requirements
of subsection (f) and</quote> after <quote>Such present value shall be
determined</quote>.</text>
</subparagraph><subparagraph id="idFB6E4FD791E646D983BF20D8EC4208BD"><enum>(B)</enum><text>Section
54(l)(3)(B) is amended by striking <quote>section 1397E(i)</quote> and
inserting <quote>section 1397E(l)</quote>.</text>
</subparagraph></paragraph></subsection><subsection commented="no" display-inline="no-display-inline" id="IDD46233A979C64DF49F75A5DE15940160"><enum>(d)</enum><header>Effective
date</header><text>The amendments made by this section shall apply to
obligations issued after December 31, 2005.</text>
</subsection></section><section id="ID38EDFEB960364656B74C455868BA07ED"><enum>217.</enum><header>Deduction for
corporate donations of computer technology and equipment</header><text display-inline="no-display-inline">Section 170(e)(6)(G) is amended by striking
<quote>2005</quote> and inserting <quote>2006</quote>.</text>
</section><section id="ID9C38C96949604C83B878E4919425F475"><enum>218.</enum><header>Above-the-line
deduction for certain expenses of elementary and secondary school
teachers</header><text display-inline="no-display-inline">Subparagraph (D) of
section 62(a)(2) is amended by striking <quote>or 2005</quote> and inserting
<quote>2005, or 2006</quote>.</text>
</section><section id="IDF83F6A9F92354A28AF2801CEE55E46F0"><enum>219.</enum><header>Expensing of
brownfields remediation costs</header>
<subsection id="idF519B368E3BE4104AACB414370D2F32F"><enum>(a)</enum><header>Extension</header><text display-inline="yes-display-inline">Subsection (h) of section 198 is amended by
striking <quote>2005</quote> and inserting <quote>2006</quote>.</text>
</subsection><subsection id="idC23DF45BC2F7489D8A458C4A0DB5670C"><enum>(b)</enum><header>Expansion</header>
<paragraph id="id2B5B050A01FE4F92BC5ACA679F6E3594"><enum>(1)</enum><header>In
general</header><text>Section 198(d)(1) (defining hazardous substance) is
amended by striking <quote>and</quote> at the end of subparagraph (A), by
striking the period at the end of subparagraph (B) and inserting <quote>,
and</quote>, and by adding at the end the following new subparagraph:</text>
<quoted-block display-inline="no-display-inline" id="id19EBDC282BC14B69AAA841B138BA30CC" style="OLC">
<subparagraph id="idB99B48981A1142E9A4C1DD46BB36F2A7"><enum>(C)</enum><text>any petroleum
product (as defined in section
4612(a)(3)).</text>
</subparagraph><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph><paragraph commented="no" display-inline="no-display-inline" id="id5F6D0F1C76CD4F7C9FBC88FDB99D3B8B"><enum>(2)</enum><header>Effective
date</header><text>The amendments made by this subsection shall apply to
expenditures paid or incurred after December 31, 2005.</text>
</paragraph></subsection></section><section id="ID9498FF105BE8498DBC0455E0D84E728C"><enum>220.</enum><header>Tax incentives
for investment in the District of Columbia</header>
<subsection id="IDB2D21E3B62A14FF4893E0B965ECE07AF"><enum>(a)</enum><header>Designation of
zone</header><text>Subsection (f) of section 1400 is amended by striking
<quote>2005</quote> both places it appears and inserting
<quote>2006</quote>.</text>
</subsection><subsection id="IDC2463C141A1B45DCB36475CB5DF041D6"><enum>(b)</enum><header>Tax-exempt
economic development bonds</header><text>Subsection (b) of section 1400A is
amended by striking <quote>2005</quote> and inserting
<quote>2006</quote>.</text>
</subsection><subsection id="ID9A6846D0B99D4F3A8EBFC305E1438430"><enum>(c)</enum><header>Zero percent
capital gains rate</header>
<paragraph id="IDA0E15A8BA3E34E7EA0133B23A0FCE51E"><enum>(1)</enum><header>In
general</header><text>Subsection (b) of section 1400B is amended by striking
<quote>2006</quote> each place it appears and inserting
<quote>2007</quote>.</text>
</paragraph><paragraph id="IDFCE37877C56D4BCF8842B9B877A21EDB"><enum>(2)</enum><header>Conforming
amendments</header>
<subparagraph id="IDC3EF5E5058F84C43B5D27CA7B7F01336"><enum>(A)</enum><text>Section
1400B(e)(2) is amended—</text>
<clause id="IDFBB8040EA021449FA9D1B8B74995C5FB"><enum>(i)</enum><text>by
striking <quote>2010</quote> and inserting <quote>2011</quote>, and</text>
</clause><clause id="ID0AE0B780444B4E0E8984552527688B12"><enum>(ii)</enum><text>by
striking <quote><header-in-text level="paragraph" style="OLC">2010</header-in-text></quote> in the heading and inserting
<quote><header-in-text level="paragraph" style="OLC">2011</header-in-text></quote>.</text>
</clause></subparagraph><subparagraph id="ID83F4D66BCA2541548B033AE9954842C6"><enum>(B)</enum><text>Section
1400B(g)(2) is amended by striking <quote>2010</quote> and inserting
<quote>2011</quote>.</text>
</subparagraph><subparagraph id="ID4225ABDCF6F44DB3A37752CF46A2775E"><enum>(C)</enum><text>Section 1400F(d)
is amended by striking <quote>2010</quote> and inserting
<quote>2011</quote>.</text>
</subparagraph></paragraph></subsection><subsection id="ID151163E42F744BE9A9673C6B08483BDB"><enum>(d)</enum><header>First-time
homebuyer credit</header><text>Subsection (i) of section 1400C is amended by
striking <quote>2006</quote> and inserting <quote>2007</quote>.</text>
</subsection></section><section id="ID0B9A64F84D83435597D5D7341678DC99"><enum>221.</enum><header>Indian
employment tax credit</header><text display-inline="no-display-inline">Section
45A(f) is amended by striking <quote>2005</quote> and inserting
<quote>2006</quote>.</text>
</section><section commented="no" display-inline="no-display-inline" id="ID529CBEEFA962470FB3258675FB949F1D" section-type="subsequent-section"><enum>222.</enum><header>Accelerated
depreciation for business property on Indian reservation</header><text display-inline="no-display-inline">Section 168(j)(8) is amended by striking
<quote>2005</quote> and inserting <quote>2006</quote>.</text>
</section><section commented="no" display-inline="no-display-inline" id="idEC0BD32CCE7A457E8196604A72441BF1" section-type="subsequent-section"><enum>223.</enum><header>Fifteen-year
straight-line cost recovery for qualified leasehold improvements and qualified
restaurant improvements</header><text display-inline="no-display-inline">Clauses (iv) and (v) of section 168(e)(3)(E)
are each amended by striking <quote>2006</quote> and inserting
<quote>2007</quote>.</text>
</section></subtitle><subtitle id="id9C5D21F223094FA782881C8FAAE9BB93"><enum>C</enum><header>Application of
EGTRRA sunset</header>
<section id="ID63E78C13CF4C4F9DA5AC35DA020F9B5B"><enum>231.</enum><header>Application of
EGTRRA sunset to this title</header><text display-inline="no-display-inline">Each amendment made by this title shall be
subject to title IX of the Economic Growth and Tax Relief Reconciliation Act of
2001 to the same extent and in the same manner as the provision of such Act to
which such amendment relates.</text>
</section></subtitle><enum>III</enum><header>Provisions
relating to charitable donations</header>
<subtitle id="IDE8DCE147BE74460493C56F4CADE237BC"><enum>A</enum><header>Charitable giving
incentives</header>
<section id="ID03D83EE3911F480B945A4698E2EC3468"><enum>301.</enum><header>Charitable
deduction for nonitemizers</header>
<subsection id="ID05015C4584D04F77949E4B919E45AF58"><enum>(a)</enum><header>In
General</header><text>Section 170 (relating to charitable, etc., contributions
and gifts) is amended by redesignating subsection (o) as subsection (p) and by
inserting after subsection (n) the following new subsection:</text>
<quoted-block id="ID78485863FF7D4E79A5BC879C00D40BB4" style="OLC">
<subsection id="ID5B4A2940956146E4B05C3F3A202AE0AE"><enum>(o)</enum><header>Deduction for
Individuals Not Itemizing Deductions</header><text>In the case of an individual
who does not itemize deductions for any taxable year beginning after December
31, 2005, and before January 1, 2008, there shall be taken into account as a
direct charitable deduction under section 63 an amount equal to the amount
allowable under subsection (a) for the taxable year for cash contributions
(determined without regard to any
carryover).</text>
</subsection><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="ID3389D740D20342B6BDC50F2A19462215"><enum>(b)</enum><header>Direct
Charitable Deduction</header>
<paragraph id="IDDF1D56718A4A4BDEB901C555C5813EF2"><enum>(1)</enum><header>In
general</header><text>Subsection (b) of section 63 (defining taxable income) is
amended by striking <quote>and</quote> at the end of paragraph (1), by striking
the period at the end of paragraph (2) and inserting <quote>, and</quote>, and
by adding at the end the following new paragraph:</text>
<quoted-block id="ID0A9F67F54A734EF198B97E250D8CC770" style="OLC">
<paragraph id="ID32889C0460FB490FB70CF4D18A2C6C55"><enum>(3)</enum><text>the direct
charitable
deduction.</text>
</paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph><paragraph id="ID57A45831E7CF40849CC9D08A809DAE7D"><enum>(2)</enum><header>Definition</header><text>Section
63 is amended by redesignating subsection (g) as subsection (h) and by
inserting after subsection (f) the following new subsection:</text>
<quoted-block id="ID45F1172CFA1B418697B796B1D23C6493" style="OLC">
<subsection id="IDBC338533FF974B1CA2FCE31A15FFC139"><enum>(g)</enum><header>Direct
Charitable Deduction</header><text>For purposes of this section, the term
<term>direct charitable deduction</term> means that portion of the amount
allowable under section 170(a) which is taken as a direct charitable deduction
for the taxable year under section
170(o).</text>
</subsection><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph><paragraph id="ID5CA712DB1A8547C8A9EB82B88ACC8DC3"><enum>(3)</enum><header>Conforming
amendment</header><text>Subsection (d) of section 63 is amended by striking
<quote>and</quote> at the end of paragraph (1), by striking the period at the
end of paragraph (2) and inserting <quote>, and</quote>, and by adding at the
end the following new paragraph:</text>
<quoted-block id="IDC3D9088807124FA79D94A73B99971050" style="OLC">
<paragraph id="ID210AFA82C46748948B2DBD3715DD82B8"><enum>(3)</enum><text>the direct
charitable
deduction.</text>
</paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph></subsection><subsection id="ID792E24EA21AC4AAB9DCAD4371DF2C4AF"><enum>(c)</enum><header>Floor on
charitable contributions by individuals</header><text>Section 170(a) is amended
by adding at the end the following new paragraph:</text>
<quoted-block display-inline="no-display-inline" id="id7D4E9CBED83F4119B4D64CC16F3C80F7" style="OLC">
<paragraph id="idA2E0674404ED4A689EE5378C5F6FBBDD"><enum>(4)</enum><header>Dollar floor on
charitable contributions by individuals</header><text>In the case of an
individual, the charitable contributions of the taxpayer for any taxable year
shall be taken into account for purposes of determining the deduction under
paragraph (1) only to the extent that the aggregate of such contributions
exceeds $210 ($420 in the case of a joint
return).</text>
</paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="IDCC80E33AA17C4A6099623D67D6AFF5C6"><enum>(d)</enum><header>Effective
Date</header><text>The amendments made by this section shall apply to
contributions made in taxable years beginning after December 31, 2005.</text>
</subsection></section><section id="IDF52087C7C4E64A3A0008C484CCD12E00"><enum>302.</enum><header>Tax-free
distributions from individual retirement plans for charitable purposes</header>
<subsection id="ID0703ADE3E1FB4961007F97575804BC59"><enum>(a)</enum><header>In
general</header><text>Subsection (d) of section 408 (relating to individual
retirement accounts) is amended by adding at the end the following new
paragraph:</text>
<quoted-block id="ID709978A1A2DD4BA8A62C0028FA000063">
<paragraph id="ID934177B7D68B4D39B3002233D9338E4E"><enum>(8)</enum><header>Distributions
for charitable purposes</header>
<subparagraph id="IDC02AE8740CCB469300734F67A3D6D9A8"><enum>(A)</enum><header>In
general</header><text>No amount shall be includible in gross income by reason
of a qualified charitable distribution.</text>
</subparagraph><subparagraph id="ID446E3BF4DAD74A6EB35D55A6897B3DC8"><enum>(B)</enum><header>Qualified
charitable distribution</header><text>For purposes of this paragraph, the term
<term>qualified charitable distribution</term> means any distribution from an
individual retirement plan (other than a plan described in subsection (k) or
(p) of section 408)—</text>
<clause id="ID8A898FFC67F24A14A2EBA0968675B4D5"><enum>(i)</enum><text>which is made on
or after the date that the individual for whose benefit the plan is maintained
has attained age 70<fraction>1/2</fraction>, and</text>
</clause><clause id="ID958EB57EAD124BA8A1EC58238350ADEA"><enum>(ii)</enum><text>which is made
directly by the trustee—</text>
<subclause id="ID39193A8096674B2085EFBBDEC3C39841"><enum>(I)</enum><text>to an
organization described in section 170(c), or</text>
</subclause><subclause id="IDE5294F27608E4D459E0100F811BF551D"><enum>(II)</enum><text>to a
split-interest entity.</text>
</subclause></clause><continuation-text continuation-text-level="subparagraph">A
distribution shall be treated as a qualified charitable distribution only to
the extent that the distribution would be includible in gross income without
regard to subparagraph (A) and, in the case of a distribution to a
split-interest entity, only if no person holds an income interest in the
amounts in the split-interest entity attributable to such distribution other
than one or more of the following: the individual for whose benefit such plan
is maintained, the spouse of such individual, or any organization described in
section 170(c).</continuation-text></subparagraph><subparagraph id="ID3BA9C9A8A15741F0B359732FD67FCD71"><enum>(C)</enum><header>Contributions
must be otherwise deductible</header><text>For purposes of this
paragraph—</text>
<clause id="ID0E7EFD77FED4463293B8805946D2F776"><enum>(i)</enum><header>Direct
contributions</header><text>A distribution to an organization described in
section 170(c) shall be treated as a qualified charitable distribution only if
a deduction for the entire distribution would be allowable under section 170
(determined without regard to subsections (a)(4) and (b) thereof and this
paragraph).</text>
</clause><clause id="ID0B44A627880442AEA0DED0B174EA012E"><enum>(ii)</enum><header>Split-interest
gifts</header><text>A distribution to a split-interest entity shall be treated
as a qualified charitable distribution only if a deduction for the entire value
of the interest in the distribution for the use of an organization described in
section 170(c) would be allowable under section 170 (determined without regard
to subsections (a)(4) and (b) thereof and this paragraph).</text>
</clause></subparagraph><subparagraph id="ID2647F33959074E81BC10875F146CCD21"><enum>(D)</enum><header>Application of
Section <enum-in-header>72</enum-in-header></header><text>Notwithstanding
section 72, in determining the extent to which a distribution is a qualified
charitable distribution, the entire amount of the distribution shall be treated
as includible in gross income without regard to subparagraph (A) to the extent
that such amount does not exceed the aggregate amount which would have been so
includible if all amounts distributed from all individual retirement plans were
treated as 1 contract under paragraph (2)(A) for purposes of determining the
inclusion of such distribution under section 72. Proper adjustments shall be
made in applying section 72 to other distributions in such taxable year and
subsequent taxable years.</text>
</subparagraph><subparagraph id="ID25D4BCA65AF1409EA3AA4FD9BF00ECA2"><enum>(E)</enum><header>Special rules
for split-interest entities</header>
<clause id="ID55EF1B6771BA47F7A2855B49DB65AAE0"><enum>(i)</enum><header>Charitable
remainder trusts</header><text>Notwithstanding section 664(b), distributions
made from a trust described in subparagraph (G)(i) shall be treated as ordinary
income in the hands of the beneficiary to whom is paid the annuity described in
section 664(d)(1)(A) or the payment described in section 664(d)(2)(A).</text>
</clause><clause id="ID36754B57889C4C8CB6A932DA1322C4B8"><enum>(ii)</enum><header>Pooled income
funds</header><text>No amount shall be includible in the gross income of a
pooled income fund (as defined in subparagraph (G)(ii)) by reason of a
qualified charitable distribution to such fund, and all distributions from the
fund which are attributable to qualified charitable distributions shall be
treated as ordinary income to the beneficiary.</text>
</clause><clause id="ID16944ACB5DC648459CDFF88263C32585"><enum>(iii)</enum><header>Charitable
gift annuities</header><text>Qualified charitable distributions made for a
charitable gift annuity shall not be treated as an investment in the
contract.</text>
</clause></subparagraph><subparagraph id="ID64F62E04EF30497A006F114CF8801819"><enum>(F)</enum><header>Denial of
deduction</header><text>Qualified charitable distributions shall not be taken
into account in determining the deduction under section 170.</text>
</subparagraph><subparagraph id="ID74DA1E43321F4AE896B04C6C52F6C196"><enum>(G)</enum><header>Split-interest
entity defined</header><text>For purposes of this paragraph, the term
<term>split-interest entity</term> means—</text>
<clause id="ID50873F18C86E4EA6AA5F5F5F721B2600"><enum>(i)</enum><text>a
charitable remainder annuity trust or a charitable remainder unitrust (as such
terms are defined in section 664(d)) which must be funded exclusively by
qualified charitable distributions,</text>
</clause><clause id="ID1BD0F3993267472693C0C7C445AD594C"><enum>(ii)</enum><text>a pooled income
fund (as defined in section 642(c)(5)), but only if the fund accounts
separately for amounts attributable to qualified charitable distributions,
and</text>
</clause><clause id="ID8C7CCD3DB28A4696A44869F6BD4DD986"><enum>(iii)</enum><text>a charitable
gift annuity (as defined in section
501(m)(5)).</text>
</clause></subparagraph></paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="ID4C64805755A34A5A9950A2B3D62EAC73"><enum>(b)</enum><header>Modifications
relating to information returns by certain trusts</header>
<paragraph id="ID76C582CABB324FD3A2B362B64E25488D"><enum>(1)</enum><header>Returns</header><text>Section
6034 (relating to returns by trusts described in section 4947(a)(2) or claiming
charitable deductions under section 642(c)) is amended to read as
follows:</text>
<quoted-block id="ID409C66CD495E4B64A994A5157FAE62B5">
<section id="IDA2D2577A7B0249CDBA9B41003EE58318"><enum>6034.</enum><header>Returns by
certain trusts</header>
<subsection id="ID8FB3FA4FA87E43EE84019FB9745BA629"><enum>(a)</enum><header>Split-interest
trusts</header><text>Every trust described in section 4947(a)(2) shall furnish
such information with respect to the taxable year as the Secretary may by forms
or regulations require.</text>
</subsection><subsection id="IDA8BA59CAEB844209BCF6C69024C456AA"><enum>(b)</enum><header>Trusts claiming
certain charitable deductions</header>
<paragraph id="ID0B4774AD9F1F4B1DB4AA082CFF2E8B38"><enum>(1)</enum><header>In
general</header><text>Every trust not required to file a return under
subsection (a) but claiming a deduction under section 642(c) for the taxable
year shall furnish such information with respect to such taxable year as the
Secretary may by forms or regulations prescribe, including—</text>
<subparagraph id="ID12F97B8BE808441483E5E90010AF48BC"><enum>(A)</enum><text>the amount of the
deduction taken under section 642(c) within such year,</text>
</subparagraph><subparagraph id="IDF25E277BC5724E72AACBB6FD86822685"><enum>(B)</enum><text>the amount paid
out within such year which represents amounts for which deductions under
section 642(c) have been taken in prior years,</text>
</subparagraph><subparagraph id="ID4A735AC7D74B4920A7BDED925778FFBC"><enum>(C)</enum><text>the amount for
which such deductions have been taken in prior years but which has not been
paid out at the beginning of such year,</text>
</subparagraph><subparagraph id="IDB62CACE3A7A34E99AACC727C7C86141D"><enum>(D)</enum><text>the amount paid
out of principal in the current and prior years for the purposes described in
section 642(c),</text>
</subparagraph><subparagraph id="ID61E744DB043243D6B95C34A183DF518E"><enum>(E)</enum><text>the total income
of the trust within such year and the expenses attributable thereto, and</text>
</subparagraph><subparagraph id="ID0179520B013D4EDFA742175046F163E1"><enum>(F)</enum><text>a balance sheet
showing the assets, liabilities, and net worth of the trust as of the beginning
of such year.</text>
</subparagraph></paragraph><paragraph id="ID34F2265132BB49EFA2442C078961612E"><enum>(2)</enum><header>Exceptions</header><text>Paragraph
(1) shall not apply to a trust for any taxable year if—</text>
<subparagraph id="ID231CCBB527AF48B189B0EDB6BEF2A3FF"><enum>(A)</enum><text>all the net
income for such year, determined under the applicable principles of the law of
trusts, is required to be distributed currently to the beneficiaries, or</text>
</subparagraph><subparagraph id="IDDCFAF2C774544220A59CB1CECA009289"><enum>(B)</enum><text>the trust is
described in section
4947(a)(1).</text>
</subparagraph></paragraph></subsection></section><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph><paragraph id="IDB2EB9A391B0A4D3BBB32106C05F27801"><enum>(2)</enum><header>Increase in
penalty relating to filing of information return by split-interest
trusts</header><text>Paragraph (2) of section 6652(c) (relating to returns by
exempt organizations and by certain trusts) is amended by adding at the end the
following new subparagraph:</text>
<quoted-block id="ID4FAA64AAAA8F4384B24576EE2CCA118E">
<subparagraph id="IDF7A798EE73DE49938CC2A2F7A0678BEB"><enum>(C)</enum><header>Split-interest
trusts</header><text>In the case of a trust which is required to file a return
under section 6034(a), subparagraphs (A) and (B) of this paragraph shall not
apply and paragraph (1) shall apply in the same manner as if such return were
required under section 6033, except that—</text>
<clause id="IDE877E61706B147A5A3DCE105BAB152BC"><enum>(i)</enum><text>the 5 percent
limitation in the second sentence of paragraph (1)(A) shall not apply,</text>
</clause><clause id="ID5F9E32E2EDAE48009CA69369B14C1858"><enum>(ii)</enum><text>in the case of
any trust with gross income in excess of $250,000, the first sentence of
paragraph (1)(A) shall be applied by substituting <quote>$100</quote> for
<quote>$20</quote>, and the second sentence thereof shall be applied by
substituting <quote>$50,000</quote> for <quote>$10,000</quote>, and</text>
</clause><clause id="ID705030FABD684AB795D0F48512EC3125"><enum>(iii)</enum><text>the third
sentence of paragraph (1)(A) shall be disregarded.</text>
</clause><continuation-text continuation-text-level="subparagraph">In
addition to any penalty imposed on the trust pursuant to this subparagraph, if
the person required to file such return knowingly fails to file the return,
such penalty shall also be imposed on such person who shall be personally
liable for such
penalty.</continuation-text></subparagraph><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph><paragraph id="ID5E1E778955F747B187100968523C7000"><enum>(3)</enum><header>Confidentiality
of noncharitable beneficiaries</header><text>Subsection (b) of section 6104
(relating to inspection of annual information returns) is amended by adding at
the end the following new sentence: <quote>In the case of a trust which is
required to file a return under section 6034(a), this subsection shall not
apply to information regarding beneficiaries which are not organizations
described in section 170(c).</quote>.</text>
</paragraph></subsection><subsection id="ID1D7EFF4719B84E13BD3666BF006C7ED8"><enum>(c)</enum><header>Effective
dates</header>
<paragraph id="ID1AFF3D28768B498584FF008B5FA821FE"><enum>(1)</enum><header>Subsection
<enum-in-header>(a)</enum-in-header></header><text>The amendment made by
subsection (a) shall apply to distributions made in taxable years beginning
after December 31, 2005, and before January 1, 2008.</text>
</paragraph><paragraph commented="no" display-inline="no-display-inline" id="ID850F46DDEEA145F2B0C97456B8CE60D8"><enum>(2)</enum><header>Subsection
<enum-in-header>(b)</enum-in-header></header><text>The amendments made by
subsection (b) shall apply to returns for taxable years beginning after
December 31, 2005.</text>
</paragraph></subsection></section><section id="ID9FBCE4A2AC994F84A849B3AECB0FEC6D"><enum>303.</enum><header>Modification
of charitable deduction for contributions of food inventory</header>
<subsection id="IDF3BBF654F4404938B6B98324412FBEC1"><enum>(a)</enum><header>In
General</header><text>Subparagraph (C) of section 170(e)(3) (relating to
special rule for certain contributions of inventory and other property), as
added by section 305 of the Katrina Emergency Tax Relief Act of 2005, is
amended to read as follows:</text>
<quoted-block id="ID3B0A528F3655418BB05AB1E11D3F5C0C" style="OLC">
<subparagraph id="ID1954B97143414506A14872C985471BB5"><enum>(C)</enum><header>Special rule
for contributions of food inventory</header>
<clause id="ID87D42AF530B1412CA2F13D24F7D92F97"><enum>(i)</enum><header>General
rule</header><text>In the case of a charitable contribution of food from any
trade or business of the taxpayer, this paragraph shall be applied—</text>
<subclause id="ID7E6F4651441A49119F607120935F83F8"><enum>(I)</enum><text>without regard to
whether the contribution is made by a C corporation, and</text>
</subclause><subclause id="ID04487684CC174283862F5C084118CE03"><enum>(II)</enum><text>only to food
that is apparently wholesome food.</text>
</subclause></clause><clause id="ID9A4F93DF8FFD4A35AE137055A4951CB9"><enum>(ii)</enum><header>Limitation</header><text>In
the case of a taxpayer other than a C corporation, the aggregate amount of such
contributions for any taxable year which may be taken into account under this
section shall not exceed 10 percent of the taxpayer’s aggregate net income for
such taxable year from all trades or businesses from which such contributions
were made for such year, computed without regard to this section.</text>
</clause><clause id="ID9C024EAA3A01490EA7F8FDD7CBB7C5AD"><enum>(iii)</enum><header>Limitation on
reduction</header><text>In the case of any such contribution, notwithstanding
subparagraph (B), the amount of the reduction determined under paragraph (1)(A)
shall not exceed the amount by which the fair market value of the apparently
wholesome food exceeds twice the basis of such food.</text>
</clause><clause id="IDF70D42CAEDC34F8C85A3B6D1C494DFF6"><enum>(iv)</enum><header>Determination
of basis</header><text>If a taxpayer—</text>
<subclause id="ID5CBD30C8B8A74C28934AAEEE24FB015C"><enum>(I)</enum><text>does not account
for inventories under section 471, and</text>
</subclause><subclause id="ID00EBFDF30C5E45D691A49262928C07DE"><enum>(II)</enum><text>is not required
to capitalize indirect costs under section 263A,</text>
</subclause><continuation-text continuation-text-level="clause">the taxpayer
may elect, solely for purposes of subparagraph (B), to treat the basis of any
apparently wholesome food as being equal to 25 percent of the fair market value
of such food.</continuation-text></clause><clause id="ID76B983C19EA04D0A8A8C70A44FDF5FC2"><enum>(v)</enum><header>Determination
of fair market value</header><text>In the case of any such contribution of
apparently wholesome food which, solely by reason of internal standards of the
taxpayer or lack of market, cannot or will not be sold, the fair market value
of such contribution shall be determined—</text>
<subclause id="ID6D571E9BC595450AAC4F2042FEC27D3A"><enum>(I)</enum><text>without regard to
such internal standards or such lack of market and</text>
</subclause><subclause id="ID7D2081BEACB44DCFBF0EE7683C4792FA"><enum>(II)</enum><text>by taking into
account the price at which the same or substantially the same food items (as to
both type and quality) are sold by the taxpayer at the time of the contribution
(or, if not so sold at such time, in the recent past).</text>
</subclause></clause><clause id="IDA69A3FD856984E7098FED5B4479628A4"><enum>(vi)</enum><header>Apparently
wholesome food</header><text>For purposes of this subparagraph, the term
<term>apparently wholesome food</term> has the meaning given to such term by
section 22(b)(2) of the Bill Emerson Good Samaritan Food Donation Act (42
U.S.C. 1791(b)(2)), as in effect on the date of the enactment of this
subparagraph.</text>
</clause></subparagraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="IDA8954095CEA04C4BBAEF152CF4F71DA1"><enum>(b)</enum><header>Effective
Date</header><text>The amendment made by this section shall apply to
contributions made in taxable years beginning after December 31, 2005, and
before January 1, 2008.</text>
</subsection></section><section id="IDBE1B7D14E24649ACB9BCC9F5B4638961"><enum>304.</enum><header>Basis
adjustment to stock of S corporation contributing property</header>
<subsection id="ID99E6380B28564D20851BFBD7B1F0AC04"><enum>(a)</enum><header>In
General</header><text>Paragraph (2) of section 1367(a) (relating to adjustments
to basis of stock of shareholders, etc.) is amended by adding at the end the
following new flush sentence:</text>
<quoted-block display-inline="no-display-inline" id="ID330A98B04D17463AB476D745D2D5B9AC" style="OLC">
<quoted-block-continuation-text quoted-block-continuation-text-level="paragraph">The
decrease under subparagraph (B) by reason of a charitable contribution (as
defined in section 170(c)) of property shall be the amount equal to the
shareholder’s pro rata share of the adjusted basis of such
property.</quoted-block-continuation-text><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection commented="no" display-inline="no-display-inline" id="IDF809E38C08334ED5A08EE81C4A88E37D"><enum>(b)</enum><header>Effective
Date</header><text>The amendment made by this section shall apply to
contributions made in taxable years beginning after December 31, 2005, and
before January 1, 2008.</text>
</subsection></section><section commented="no" display-inline="no-display-inline" id="IDFE9369F0786C4BCC96DCB9BD33DB7463" section-type="subsequent-section"><enum>305.</enum><header>Modification of
charitable deduction for contributions of book inventory</header>
<subsection id="IDDF807C403DF548A5B9E06D7411A658C4"><enum>(a)</enum><header>In
General</header><text>Subparagraph (D) of section 170(e)(3) (relating to
special rule for certain contributions of inventory and other property), as
added by section 305 of the Katrina Emergency Tax Relief Act of 2005, is
amended to read as follows:</text>
<quoted-block id="ID6814A5C975724FAC905FDC85DAB8845F" style="OLC">
<subparagraph id="ID64F85954B45644C8AD6AC48C1A0CFD2E"><enum>(D)</enum><header>Special rule
for contributions of book inventory for educational purposes</header>
<clause id="ID075D6863EE344C3BBA1B2404319F4F12"><enum>(i)</enum><header>Contributions
of book inventory</header><text>In determining whether a qualified book
contribution is a qualified contribution, subparagraph (A) shall be applied
without regard to whether—</text>
<subclause id="IDDB6FDB49E05B4983A2E22ED076961BFF"><enum>(I)</enum><text>the donee is an
organization described in the matter preceding clause (i) of subparagraph (A),
and</text>
</subclause><subclause id="IDE3DC01EE8AFB44C0A707CD8AD2941905"><enum>(II)</enum><text>the property is
to be used by the donee solely for the care of the ill, the needy, or
infants.</text>
</subclause></clause><clause id="IDE63483C3761B4AEFABD0F84395FBD89D"><enum>(ii)</enum><header>Amount of
reduction</header><text>Notwithstanding subparagraph (B), the amount of the
reduction determined under paragraph (1)(A) shall not exceed the amount by
which the fair market value of the contributed property (as determined by the
taxpayer using a bona fide published market price for such book) exceeds twice
the basis of such property.</text>
</clause><clause id="IDC2CF14F9D47C490EB6F7C2EF6B09266A"><enum>(iii)</enum><header>Qualified
book contribution</header><text>For purposes of this paragraph, the term
<term>qualified book contribution</term> means a charitable contribution of
books, but only if the requirements of clauses (iv) and (v) are met.</text>
</clause><clause id="IDA66A2654BB6F42EE99A22075577E6774"><enum>(iv)</enum><header>Identity of
donee</header><text>The requirement of this clause is met if the contribution
is to an organization—</text>
<subclause id="ID4BE4546A4DB44236967E0D7C965FE0D2"><enum>(I)</enum><text>described in
subclause (I) or (III) of paragraph (6)(B)(i), or</text>
</subclause><subclause id="ID705BABB2312245E59535A72C16DAD207"><enum>(II)</enum><text>described in
section 501(c)(3) and exempt from tax under section 501(a) (other than a
private foundation, as defined in section 509(a), which is not an operating
foundation, as defined in section 4942(j)(3)), which is organized primarily to
make books available to the general public at no cost or to operate a literacy
program.</text>
</subclause></clause><clause id="IDF5B3691B3C4844CCB5BEBD6D115E03F9"><enum>(v)</enum><header>Certification
by donee</header><text>The requirement of this clause is met if, in addition to
the certifications required by subparagraph (A) (as modified by this
subparagraph), the donee certifies in writing that—</text>
<subclause id="ID7E8707ECC77344C3B6D12D6624B91034"><enum>(I)</enum><text>the books are
suitable, in terms of currency, content, and quantity, for use in the donee’s
educational programs, and</text>
</subclause><subclause id="ID604F583751A84560A3A55BA240C830AA"><enum>(II)</enum><text>the donee will
use the books in its educational programs.</text>
</subclause></clause><clause id="ID83B48408E3A64479906C69D31113C684"><enum>(vi)</enum><header>Bona fide
published market price</header><text>For purposes of this subparagraph, the
term <term>bona fide published market price</term> means, with respect to any
book, a price—</text>
<subclause id="ID30D3820137C944BB99A171AC3D23969B"><enum>(I)</enum><text>determined using
the same printing and edition,</text>
</subclause><subclause id="ID52492ECF803F453C8D06767FFE77386A"><enum>(II)</enum><text>determined in
the usual market in which such a book has been customarily sold by the
taxpayer, and</text>
</subclause><subclause id="ID335D5FD848084C9AA95CDF68E4D18A9C"><enum>(III)</enum><text>for which the
taxpayer can demonstrate to the satisfaction of the Secretary that the taxpayer
customarily sold such books in arm’s length transactions within 7 years
preceding the contribution of such a
book.</text>
</subclause></clause></subparagraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection commented="no" display-inline="no-display-inline" id="ID1423E27172794ED4B580FB0C5B943653"><enum>(b)</enum><header>Effective
Date</header><text>The amendment made by this section shall apply to
contributions made in taxable years beginning after December 31, 2005, and
before January 1, 2008.</text>
</subsection></section><section id="id2022FA82D7AB4B91A54FACB6BCA2E9BA"><enum>306.</enum><header>Modification
of tax treatment of certain payments to controlling exempt organizations and
public disclosure of information relating to unrelated business income</header>
<subsection id="idC4C822B86F1D4CEFBFBC0097D036A230"><enum>(a)</enum><header>Modification of
section <enum-in-header>512(b)(13)</enum-in-header></header>
<paragraph id="idA6A817A0C21D4F73ACA8A6F064DF8230"><enum>(1)</enum><header>In
General</header><text>Paragraph (13) of section 512(b) (relating to special
rules for certain amounts received from controlled entities) is amended by
redesignating subparagraph (E) as subparagraph (F) and by inserting after
subparagraph (D) the following new subparagraph:</text>
<quoted-block id="id5A874CE279B2467F88BAB93835AE64B2" style="OLC">
<subparagraph id="idCFE39B8B210F452F9224F31435F047C9"><enum>(E)</enum><header>Paragraph to
apply only to excess payments</header>
<clause id="id3811189C417B464CB26750E89DE73026"><enum>(i)</enum><header>In
general</header><text>Subparagraph (A) shall apply only to the portion of a
specified payment received or accrued by the controlling organization that
exceeds the amount which would have been paid or accrued if such payment met
the requirements prescribed under section 482.</text>
</clause><clause id="idC1041A76FA6C491ABD3380D8C3BD7CDF"><enum>(ii)</enum><header>Addition to
tax for valuation misstatements</header><text>The tax imposed by this chapter
on the controlling organization shall be increased by an amount equal to 20
percent of the larger of—</text>
<subclause id="idEF10BE9C9D4C4F0EAD0CF6584A2307CA"><enum>(I)</enum><text>such excess
determined without regard to any amendment or supplement to a return of tax,
or</text>
</subclause><subclause id="idB74BB9CA1AE4475A8196076598BE8DF7"><enum>(II)</enum><text>such excess
determined with regard to all such amendments and
supplements.</text>
</subclause></clause></subparagraph><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph><paragraph id="idA0EE91A80C164DA8AAF3C53EAEE02700"><enum>(2)</enum><header>Effective
Date</header>
<subparagraph id="id5AFEE2DE939F4D22AC1757DC899E2FDE"><enum>(A)</enum><header>In
general</header><text>The amendment made by this subsection shall apply to
payments received or accrued after December 31, 2000.</text>
</subparagraph><subparagraph commented="no" display-inline="no-display-inline" id="id3192EB5D9CC449D8BF50A0BC0154AF7E"><enum>(B)</enum><header>Payments
subject to binding contract transition rule</header><text>If the amendments
made by section 1041 of the Taxpayer Relief Act of 1997 did not apply to any
amount received or accrued in the first 2 taxable years beginning on or after
the date of the enactment of the Taxpayer Relief Act of 1997 under any contract
described in subsection (b)(2) of such section, such amendments also shall not
apply to amounts received or accrued under such contract before January 1,
2001.</text>
</subparagraph></paragraph></subsection><subsection commented="no" display-inline="no-display-inline" id="idE90CB3409B4B4E869BD9A752B8F12AD8"><enum>(b)</enum><header>Public
availability of unrelated business income tax returns</header>
<paragraph commented="no" display-inline="no-display-inline" id="idB70218CD82F44950AA1BD155FE4B8FBA"><enum>(1)</enum><header>In
general</header><text>Subparagraph (A) of section 6104(d)(1) is amended by
redesignating clauses (ii) and (iii) as clauses (iii) and (iv), respectively,
and by inserting after clause (i) the following new clause:</text>
<quoted-block display-inline="no-display-inline" id="id69D3D76453CB462C867D1D9CF7FDD0C8" style="OLC">
<clause commented="no" display-inline="no-display-inline" id="idA3A674A25E0D459E8E8EEC136F48D632"><enum>(ii)</enum><text>any annual
return filed under section 6011 which relates to any tax imposed by section 511
(relating to imposition of tax on unrelated business income of charitable,
etc., organizations) by such
organization,</text>
</clause><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph><paragraph commented="no" display-inline="no-display-inline" id="idDC1B07D98AC040B1A239EDE4299484E1"><enum>(2)</enum><header>Effective
date</header><text>The amendments made by this subsection shall apply to
returns filed after the date of the enactment of this Act.</text>
</paragraph></subsection><subsection id="id85B0E1FAC4DC41AEAF30ACBD4C45191C"><enum>(c)</enum><header>Certification
of unrelated business taxable income for certain organizations</header>
<paragraph id="id18619EEA1088474BB06C6E6FDDB1AA9F"><enum>(1)</enum><header>In
general</header><text>Section 6011, as amended by section 311 of this Act, is
amended by redesignating subsection (h) as subsection (i) and by inserting
after subsection (g) the following new subsection:</text>
<quoted-block display-inline="no-display-inline" id="idEB7B46C9C0AE473C86EBE5BC10818287" style="OLC">
<subsection commented="no" display-inline="no-display-inline" id="idB988040361014D2694707C10540C1C85"><enum>(h)</enum><header>Returns of
certain organizations relating to unrelated business taxable income</header>
<paragraph commented="no" display-inline="no-display-inline" id="idA7100A1F93704AFE8A2F610483932404"><enum>(1)</enum><header>In
general</header><text>Every applicable exempt organization shall include with
the return under subsection (a) for the taxable year a statement by an
independent auditor or an independent counsel which meets the requirements of
paragraph (2).</text>
</paragraph><paragraph id="id80D8E47F497B4B639E11DF16355BA2F7"><enum>(2)</enum><header>Statement</header><text>A
statement meets the requirement of this paragraph if the statement—</text>
<subparagraph id="id2986D68F1DAF438C9016A72E4AE2664C"><enum>(A)</enum><text>contains a
certification that—</text>
<clause id="id3D8B70A3E2F442B18CFB7364077D3452"><enum>(i)</enum><text>the information
contained in the return—</text>
<subclause id="id604B7F77974747C6BAD6E6034737E4B0"><enum>(I)</enum><text>has been reviewed
by the auditor or counsel, and</text>
</subclause><subclause id="id6079AA847F0141619A1607C31C27D052"><enum>(II)</enum><text>to the best of
the auditor's or counsel's knowledge, is accurate, and</text>
</subclause></clause><clause id="id9BA6A65EA75041BA82381D3D84873F0B"><enum>(ii)</enum><text>to the best of
the auditor's or counsel's knowledge, the allocation of expenses between the
unrelated trades and business of the organization and the activities related to
the purpose or function constituting the basis of the organization's exemption
under section 501 complies with the requirements set forth by the Secretary
under section 512, and</text>
</clause></subparagraph><subparagraph id="id88EEBF0B9B2D4480BE151042CCE82928"><enum>(B)</enum><text>indicates—</text>
<clause id="idC521F901340E427D946713A89DFA7C98"><enum>(i)</enum><text>whether the
auditor or counsel has provided a tax opinion to the organization
regarding—</text>
<subclause id="idFF8BC3A1748647CDB41862E8514453E1"><enum>(I)</enum><text>the
classification of any trade or business of the organization as an unrelated
trade or business, or</text>
</subclause><subclause id="id59229FBA5C5B4E1B8D7CB543E28ED694"><enum>(II)</enum><text>the treatment of
any income as unrelated business taxable income, and</text>
</subclause></clause><clause id="idAFB64188128C40CD9E69E62661C272D3"><enum>(ii)</enum><text>a description of
any material facts with respect to any such opinion.</text>
</clause></subparagraph></paragraph><paragraph id="id7E4FE21D4657418AB63EE6FBBD235378"><enum>(3)</enum><header>Applicable
exempt organization</header><text>For purposes of this subsection, the term
<term>applicable exempt organization</term> means any organization
which—</text>
<subparagraph commented="no" display-inline="no-display-inline" id="id44C627D8ABA84786BC4850E124F65028"><enum>(A)</enum><text>is described in
section 501(c)(3),</text>
</subparagraph><subparagraph commented="no" display-inline="no-display-inline" id="idF685C88BBCC2424F9E10DA8DAB5D5429"><enum>(B)</enum><text>has—</text>
<clause commented="no" display-inline="no-display-inline" id="id0BC8F0178D4144FBB5539F4342CF3580"><enum>(i)</enum><text>gross income and
receipts of not less than $10,000,000 for the taxable year, or</text>
</clause><clause commented="no" display-inline="no-display-inline" id="idB2F1A647D62B460D8E7C2E6B7A894285"><enum>(ii)</enum><text>gross assets of
not less than $10,000,000 on the last day of the taxable year, and</text>
</clause></subparagraph><subparagraph commented="no" display-inline="no-display-inline" id="id284C88BC911343BD9F9D32A6C766EA7A"><enum>(C)</enum><text>is subject to the
tax imposed under section 511 for the taxable
year.</text>
</subparagraph></paragraph></subsection><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph><paragraph id="idEAA5764B021F4815997B8C2C35D3B73C"><enum>(2)</enum><header>Penalty</header>
<subparagraph id="id53260EAB1BE344A6A8E6D877885F8973"><enum>(A)</enum><header>In
general</header><text>Part I of subchapter B of chapter 68 (relating to
assessable penalties), as amended by section 316 of this Act, is amended by
adding at the end the following new section:</text>
<quoted-block display-inline="no-display-inline" id="idF98A650DFC9B4D87A1A34B0C8A92D0A2" style="OLC">
<section id="id28E35D9AD6D84E8199C16204D8ADA3C0"><enum>6720C.</enum><header>Unrelated
business income requirements</header>
<subsection id="id2EC517C5880D4BD085F1C794C9A869A6"><enum>(a)</enum><header>In
general</header><text>Any applicable exempt organization (as defined in section
6011(h)(3)) which fails to file a statement required under section 6011(h)
shall pay a penalty in an amount equal to ½ percent of the gross revenue amount
of such organization for the taxable year to which such statement
relates.</text>
</subsection><subsection id="id469FC21A738940E69F6D4864F5AAA62F"><enum>(b)</enum><header>Gross revenue
amount</header><text>For purposes of subsection (a), the term <term>gross
revenue amount</term> means, with respect to any taxable year, the gross income
and receipts of the organization determined without regard to any contributions
or grants received by the organization.</text>
</subsection><subsection id="id8076547724134460B101E231EDC4D01C"><enum>(c)</enum><header>Reasonable
cause</header><text>No penalty shall be imposed under this section with respect
to any failure if it is shown that such failure is due to reasonable
cause.</text>
</subsection></section><after-quoted-block>.</after-quoted-block></quoted-block>
</subparagraph><subparagraph id="id56D7C2D88EB74141A5812D3094844CB6"><enum>(B)</enum><header>Conforming
amendment</header><text>The table of sections of part I of subchapter B of
chapter 68, as amended by section 316 of this Act, is amended by adding after
the item relating to section 6720B the following new item:</text>
<quoted-block display-inline="no-display-inline" id="id007773355ACA4AC29C198283CD6690C5" style="OLC">
<toc>
<toc-entry bold="off" level="section">Sec. 6720C. Unrelated business
income
requirements.</toc-entry>
</toc>
<after-quoted-block>.</after-quoted-block></quoted-block>
</subparagraph></paragraph><paragraph id="idC87237FDE56C4EB983129993CFE096DE"><enum>(3)</enum><header>Effective
date</header><text>The amendments made by this subsection shall apply to
returns for taxable years beginning after the date of the enactment of this
Act.</text>
</paragraph></subsection></section></subtitle><subtitle id="idAA118DDECA0544AB8A73D5F089FAA65C"><enum>B</enum><header>Reforming
charitable organizations</header>
<part id="idFD23EACA786B421AB185F76B0D6A8952"><enum>I</enum><header>General
reforms</header>
<section id="idE53AE9D4AB3A4D6085570D311A6A4F1B"><enum>311.</enum><header>Tax
involvement by exempt organizations in tax shelter transactions</header>
<subsection id="ID86B18DB757E74135B395CB777ACD4D65"><enum>(a)</enum><header>Imposition of
excise tax</header>
<paragraph id="idA413C5F5E55745DBA327F5657B60FF23"><enum>(1)</enum><header>In
general</header><text>Chapter 42 (relating to private foundations and certain
other tax-exempt organizations) is amended by adding at the end the following
new subchapter:</text>
<quoted-block id="IDCA1195555E6647ED813243B9B33B36F9" style="OLC">
<subchapter id="ID411B453241AB49CF9777FFF8A84D1CD3"><enum>F</enum><header>Tax shelter
transactions</header>
<toc container-level="legis-body-container" lowest-level="section" quoted-block="no-quoted-block" regeneration="no-regeneration">
<toc-entry level="section">Sec. 4965. Excise tax on certain
tax-exempt entities entering into prohibited tax shelter
transactions.</toc-entry>
</toc>
<section id="ID33077C9E15EF4A358D91291B9CDE8635"><enum>4965.</enum><header>Excise tax on
certain Tax-Exempt entities entering into prohibited tax shelter
transactions</header>
<subsection id="ID8F9E2137CCC0491BB040FAA77214C806"><enum>(a)</enum><header>Participation
in and approval of prohibited transactions</header>
<paragraph id="ID61AA51EA8B3849EEA703F0C030D7FB5E"><enum>(1)</enum><header>Tax-exempt
entity</header>
<subparagraph id="idC4915BFB7D634910899179DB8C4C2D13"><enum>(A)</enum><header>In
general</header><text>If any tax-exempt entity (other than a tax-exempt entity
described in paragraph (4), (5), (6), or (7) of subsection (c)) is a party to a
prohibited tax shelter transaction at any time during the taxable year and
knows or has reason to know such transaction is a prohibited tax shelter
transaction, such entity shall pay a tax for such taxable year in the amount
determined under subsection (b)(1)(A).</text>
</subparagraph><subparagraph id="IDDB27662705FE45F9A85C52DF6B5AA470"><enum>(B)</enum><header>Post-transaction
determination</header><text>If any tax-exempt entity (other than a tax-exempt
entity described in paragraph (4), (5), (6), or (7) of subsection (c)) is a
party to a subsequently listed transaction at any time during the taxable year,
such entity shall pay a tax in the amount determined under subsection
(b)(1)(B).</text>
</subparagraph></paragraph><paragraph id="ID2EE932CD05AF4F338894BB264367BE5A"><enum>(2)</enum><header>Entity
manager</header><text>If any entity manager of a tax-exempt entity approves
such entity as (or otherwise causes such entity to be) a party to a prohibited
tax shelter transaction at any time during the taxable year and knows or has
reason to know that the transaction is a prohibited tax shelter transaction,
such manager shall pay a tax for such taxable year in the amount determined
under subsection (b)(2).</text>
</paragraph><paragraph id="id69D3B21D1F8A4C7C9C735F4D5B484609"><enum>(3)</enum><header>Reasonable
cause exception</header><text>No tax shall be imposed under paragraph (1)(A) or
(2) if it is shown that the participation of the tax-exempt entity in the
transaction was not willful and was due to reasonable cause.</text>
</paragraph></subsection><subsection id="ID1DF3C533C5B1423E81CCFDE264992B9D"><enum>(b)</enum><header>Amount of
tax</header>
<paragraph id="IDF940016C83094D7190F3B7C242F072FB"><enum>(1)</enum><header>Entity</header><text>In
the case of a tax-exempt entity—</text>
<subparagraph id="ID501BD56E1CEA41F7B439DEF266F3900A"><enum>(A)</enum><header>In
general</header><text>The amount of the tax imposed under subsection (a)(1)(A)
on the entity with respect to a taxable year shall be the greater of—</text>
<clause id="id29185ED9947C4A49A4999250FF2C227F"><enum>(i)</enum><text>100 percent of
the entity’s net income (after taking into account any tax imposed by this
subtitle with respect to the prohibited tax shelter transaction) for such
taxable year which is attributable to the prohibited tax shelter transaction,
or</text>
</clause><clause id="id1959321779AF43D1BEE8ABC9BE6FF6A5"><enum>(ii)</enum><text>75 percent of
the proceeds received by the entity which are attributable to the prohibited
tax shelter transaction.</text>
</clause></subparagraph><subparagraph id="IDB45F712307D44B30A83FD89887EF99E5"><enum>(B)</enum><header>Post-transaction
determination</header><text>The amount of the tax imposed under subsection
(a)(1)(B) on the entity with respect to any taxable year shall be an amount
equal to the product of—</text>
<clause id="id95C1E75BD92D402D9FDA32266E77C2FC"><enum>(i)</enum><text>the highest rate
of tax under section 11, and</text>
</clause><clause id="id3F470CB0424C44E19C6D32314F64D2DC"><enum>(ii)</enum><text>the greater
of—</text>
<subclause id="id34A47D4733284C278986C3FB2E38089B"><enum>(I)</enum><text>the entity’s net
income (after taking into account any tax imposed by this subtitle with respect
to the subsequently listed transaction) for such taxable year which is
attributable to the subsequently listed transaction and which is properly
allocable to the period beginning on the later of the date such transaction is
identified by guidance as a listed transaction by the Secretary or the first
day of the taxable year, or</text>
</subclause><subclause id="id2A61ACF145C14E9A947237F8C2F4EC48"><enum>(II)</enum><text>75 percent of
the proceeds received by the entity which are attributable to the subsequently
listed transaction and which are properly allocable to the period beginning on
the later of the date such transaction is identified by guidance as a listed
transaction by the Secretary or the first day of the taxable year.</text>
</subclause></clause></subparagraph></paragraph><paragraph id="ID6255063190974878AD8F86A7CABC85A0"><enum>(2)</enum><header>Entity
manager</header><text>In the case of each entity manager to whom subsection
(a)(2) applies, the amount of the tax under such subsection shall be $20,000
for each approval.</text>
</paragraph></subsection><subsection id="IDF698A9A9E6D8496F978CA22C71410E43"><enum>(c)</enum><header>Tax-exempt
entity</header><text>For purposes of this section, the term <term>tax-exempt
entity</term> means an entity which is—</text>
<paragraph id="ID51EF358780924E04AA089B009AF666D3"><enum>(1)</enum><text>described in
section 501(c) or 501(d),</text>
</paragraph><paragraph id="IDB69C3663623D46E4B85259FB3520702D"><enum>(2)</enum><text>described in
section 170(c) (other than an agency or instrumentality of the United States)
to which paragraph (1) of this subsection does not apply,</text>
</paragraph><paragraph id="ID1EC0B90E0A6242E880AFB5182A124398"><enum>(3)</enum><text>an Indian tribal
government (within the meaning of section 7701(a)(40)),</text>
</paragraph><paragraph id="ID121EB8D2CCA4465FB988484CEC8D102E"><enum>(4)</enum><text>described in
paragraph (1), (2), or (3) of section 4979(e),</text>
</paragraph><paragraph id="IDAD30582E5A9F482DBD9AE3F5CFC40977"><enum>(5)</enum><text>a program
described in section 529,</text>
</paragraph><paragraph id="ID96B23E8B151C41EEA9EE2847EA5CC68C"><enum>(6)</enum><text>an eligible
deferred compensation plan described in section 457(b) which is maintained by
an employer described in section 4457(e)(1)(A), or</text>
</paragraph><paragraph id="ID58F9094E052749E2BEB5898474D64486"><enum>(7)</enum><text>an arrangement
described in section 4973(a).</text>
</paragraph></subsection><subsection id="ID402A507BC33744B889A9467453645158"><enum>(d)</enum><header>Entity
manager</header><text>For purposes of this section, the term <term>entity
manager</term> means—</text>
<paragraph id="ID5038394FCBC84572AC1C98AE53173C5A"><enum>(1)</enum><text>with respect to a
tax-exempt entity described in paragraph (3) or (4) of section 501(c)—</text>
<subparagraph id="idF63D226E30714DA1AD16ACB5167B1110"><enum>(A)</enum><text>in the case of an
entity other than a private foundation, an organization manager (as defined in
section 4958(f)(2)), and</text>
</subparagraph><subparagraph id="id414925A0508346649078A7CC9F477146"><enum>(B)</enum><text>in the case of a
private foundation, a foundation manager (as defined in section 4946(b)),
and</text>
</subparagraph></paragraph><paragraph id="IDA7F733E7F8BE4430B41CB9C76EB48DA1"><enum>(2)</enum><text>in all other
cases, the person with authority or responsibility similar to that exercised by
an officer, director, or trustee of an organization.</text>
</paragraph></subsection><subsection id="ID1072BA13EB0F499CB1C10DC2022D1489"><enum>(e)</enum><header>Prohibited tax
shelter transaction; Subsequently listed transaction</header><text>For purposes
of this section—</text>
<paragraph id="id75EBB2EDA0954A69B3DBAD3FBC123EDF"><enum>(1)</enum><header>Prohibited tax
shelter transaction</header>
<subparagraph id="idC6C223DDB334478DBB1673181D8F3817"><enum>(A)</enum><header>In
general</header><text>The term <term>prohibited tax shelter transaction</term>
means—</text>
<clause id="id6F9310B879C4412AA34D8CEC07F95ABC"><enum>(i)</enum><text>any listed
transaction, or</text>
</clause><clause id="id0FAB3848A1C84DE8BC7854696478B973"><enum>(ii)</enum><text>any prohibited
reportable transaction if the tax-exempt entity knows or has reason to know
that such transaction is a reportable transaction.</text>
</clause></subparagraph><subparagraph id="idE758045AF22149F6965AFA9A7A44A3E3"><enum>(B)</enum><header>Listed
transaction</header><text>The term <term>listed transaction</term> has the
meaning given such term by section 6707A(c)(2).</text>
</subparagraph><subparagraph id="idE92B49D916EF41F8A73DF0251E2B2473"><enum>(C)</enum><header>Prohibited
reportable transaction</header><text>The term <term>prohibited reportable
transaction</term> means any confidential transaction or any transaction with
contractual protection (as defined under regulations prescribed by the
Secretary) which is a reportable transaction (as defined in section
6707A(c)(1)).</text>
</subparagraph></paragraph><paragraph id="id1C5EC262B87E47AB8BF411B564650D67"><enum>(2)</enum><header>Subsequently
listed transaction</header><text>The term <term>subsequently listed
transaction</term> means any transaction to which a tax-exempt entity is a
party and which is determined by the Secretary to be a listed transaction at
any time after the entity has entered into the transaction.</text>
</paragraph></subsection><subsection id="ID22645595564B48239430BF7F7BB71CBC"><enum>(f)</enum><header>Regulatory
Authority</header><text>The Secretary is authorized to promulgate regulations
which provide guidance regarding the determination of the allocation of net
income of a tax-exempt entity attributable to a transaction to various periods,
including before and after the listing of the transaction or the date which is
90 days after the date of the enactment of this section.</text>
</subsection><subsection id="ID0ED3FBAB46A54845A5C182DB343784D8"><enum>(g)</enum><header>Coordination
with other taxes and penalties</header><text>The tax imposed by this section is
in addition to any other tax, addition to tax, or penalty imposed under this
title.</text>
</subsection></section></subchapter><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph><paragraph id="IDA233A038D99446339129EE5CFC7360E1"><enum>(2)</enum><header>Conforming
amendment</header><text>The table of subchapters of chapter 42 is amended by
adding at the end the following new item:</text>
<quoted-block display-inline="no-display-inline" id="ID97C010FAB2994EE79955B1919B910D92" style="OLC">
<toc regeneration="no-regeneration">
<toc-entry level="subchapter">Subchapter F. Tax shelter
transactions.</toc-entry>
</toc>
<after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph></subsection><subsection id="ID6DC8F74D4B8D40418B534B6A55C08AFD"><enum>(b)</enum><header>Disclosure
requirements</header>
<paragraph id="ID8ADA46A2925B4693B4D764B022BEC5AE"><enum>(1)</enum><header>Disclosure by
organization to the Internal Revenue Service</header>
<subparagraph id="idA15DB1D74892454ABE1C5CB6B851B48B"><enum>(A)</enum><header>In
general</header><text>Section 6033(a) (relating to organizations required to
file) is amended by redesignating paragraph (2) as paragraph (3), and by
inserting after paragraph (1) the following new paragraph:</text>
<quoted-block id="ID5DB52180986A4A1EAE3EBF6713D53ED6" style="OLC">
<paragraph id="IDF4223619A6514993A04E3F63F45677B1"><enum>(2)</enum><header>Participation
in certain reportable transactions</header><text>Every tax-exempt entity
described in section 4965(c) shall file (in such form and manner and at such
time as determined by the Secretary) a disclosure of—</text>
<subparagraph id="idD95576841B974DE6A38309A33ADC88C1"><enum>(A)</enum><text>such entity’s
participation in any prohibited tax shelter transaction (as defined in section
4965(e)), and</text>
</subparagraph><subparagraph id="idD6327EC455474A0B97B721F32826D35B"><enum>(B)</enum><text>the identity of
any other party participating in such transaction which is known by such
tax-exempt
entity.</text>
</subparagraph></paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subparagraph><subparagraph id="ID4589BC2F748F4103A68CE58886391ECF"><enum>(B)</enum><header>Conforming
amendment</header><text>Section 6033(a)(1) is amended by striking
<quote>paragraph (2)</quote> and inserting <quote>paragraph (3)</quote>.</text>
</subparagraph></paragraph><paragraph id="ID5F37898E4714425AAC96D1AB199076DD"><enum>(2)</enum><header>Disclosure by
other taxpayers to the tax-exempt entity</header><text>Section 6011 (relating
to general requirement of return, statement, or list) is amended by
redesignating subsection (g) as subsection (h) and by inserting after
subsection (f) the following new subsection:</text>
<quoted-block display-inline="no-display-inline" id="IDFB5449694DBD4FBB966BE78FB45D0058" style="OLC">
<subsection id="ID133720B8992A4D4384BAABC336CED491"><enum>(g)</enum><header>Disclosure of
Reportable Transaction to Tax-Exempt Entity</header><text>Any taxable party to
a prohibited tax shelter transaction (as defined in section 4965(e)(1)) shall
by statement disclose to any tax-exempt entity (as defined in section 4965(c))
which is a party to such transaction that such transaction is such a prohibited
tax shelter
transaction.</text>
</subsection><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph></subsection><subsection id="idA6A60C4C5D7E4C4399369C455CED3663"><enum>(c)</enum><header>Penalty for
nondisclosure</header>
<paragraph id="ID57D526BCE76F4550981FFE78739B9409"><enum>(1)</enum><header>In
general</header><text>Section 6652(c) (relating to returns by exempt
organizations and by certain trusts), as amended by section 302, is amended by
redesignating paragraphs (2), (3), and (4) as paragraphs (3), (4), and (5),
respectively, and by inserting after paragraph (1) the following new
paragraph:</text>
<quoted-block id="ID4A17D8D7B7024F1F9003D3C0866ACFAA" style="OLC">
<paragraph id="ID9CB957033FA44CDCA8B3ADCBE0124668"><enum>(2)</enum><header>Disclosure
under section <enum-in-header>6033</enum-in-header></header>
<subparagraph id="IDF05743F1A1C24054B4E25B2878F98AFE"><enum>(A)</enum><header>Penalty on
organizations</header><text>In the case of a failure to file a disclosure
required under section 6033(a)(2), there shall be paid by the tax-exempt entity
(the entity manager in the case of a tax-exempt entity described in paragraph
(4), (5), (6), or (7) of section 4965(c)) $100 for each day during which such
failure continues. The maximum penalty under this subparagraph on failures with
respect to any 1 disclosure shall not exceed $50,000.</text>
</subparagraph><subparagraph id="ID3EB7B69C1D9F43719DB5E77B5B010896"><enum>(B)</enum><header>Persons</header>
<clause id="IDAAF18DAF6E5B4373918DB219710E5074"><enum>(i)</enum><header>In
general</header><text>The Secretary may make a written demand on any tax-exempt
entity subject to penalty under subparagraph (A) specifying therein a
reasonable future date by which the disclosure shall be filed for purposes of
this subparagraph.</text>
</clause><clause id="IDEC1F6D6A43F04D23A1D08F10343EAAF0"><enum>(ii)</enum><header>Failure to
comply with demand</header><text>If any person fails to comply with any demand
under clause (i) on or before the date specified in such demand, there shall be
paid by such person failing to so comply $100 for each day after the expiration
of the time specified in such demand during which such failure continues. The
maximum penalty imposed under this subparagraph on all tax-exempt entities for
failures with respect to any 1 disclosure shall not exceed $10,000.</text>
</clause></subparagraph><subparagraph id="idC938A9D91F914C96B3AD70647E7A9B67"><enum>(C)</enum><header>Definitions</header><text>Any
term used in this section which is also used in section 4965 shall have the
meaning given such term under section
4965.</text>
</subparagraph></paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph><paragraph commented="no" display-inline="no-display-inline" id="IDA7AEA9EBA9CD4A47BED4F72F50E36B3B"><enum>(2)</enum><header>Conforming
amendment</header><text>Subparagraph (A) of section 6652(c)(1) of such Code is
amended by striking <quote>6033</quote> each place it appears in the text and
heading thereof and inserting <quote>6033(a)(1)</quote>.</text>
</paragraph></subsection><subsection id="IDF5B499494A06420E8482359ED4C34F2E"><enum>(d)</enum><header>Effective
dates</header>
<paragraph id="ID1A3D592578FD461298539B4ED6E69B17"><enum>(1)</enum><header>In
general</header><text>Except as provided in paragraph (2), the amendments made
by this section shall apply to transactions after the date of the enactment of
this Act, except that no tax under section 4965(a) of the Internal Revenue Code
of 1986 (as added by this section) shall apply with respect to income that is
properly allocable to any period on or before the date which is 90 days after
such date of enactment.</text>
</paragraph><paragraph commented="no" display-inline="no-display-inline" id="ID0BB283014D4A48BBBB63741E938FC90A"><enum>(2)</enum><header>Disclosure</header><text>The
amendments made by subsections (b) and (c) shall apply to disclosures the due
date for which are after the date of the enactment of this Act.</text>
</paragraph></subsection></section><section id="idA2965810B69649AEA44D1D4E21AE9188"><enum>312.</enum><header>Excise tax on
certain acquisitions of interests in insurance contracts in which certain
exempt organizations hold an interest</header>
<subsection id="idE06066482839437C993A670772927DEB"><enum>(a)</enum><header>Imposition of
tax</header>
<paragraph id="idAF540537424643139A9DBE940A1F88E7"><enum>(1)</enum><header>In
general</header><text>Subchapter F of chapter 42 (relating to tax shelter
transactions), as added by this Act, is amended by adding at the end the
following new section:</text>
<quoted-block display-inline="no-display-inline" id="idB39086491855485290EDD199AAD93634" style="OLC">
<section id="id58B9C3262B3E45269D5426D40961DC11"><enum>4966.</enum><header>Excise tax on
acquisition of interests in insurance contracts in which certain exempt
organizations hold an interest</header>
<subsection id="idBD67E8776C214F719F5C2810648645E4"><enum>(a)</enum><header>Imposition of
tax</header><text>If there is a taxable acquisition of any interest in an
applicable insurance contract, there is hereby imposed on the person acquiring
the interest a tax equal to 100 percent of the acquisition costs of the
interest.</text>
</subsection><subsection id="id45D4AEE02AB043B388A960CDABBCBFE2"><enum>(b)</enum><header>Taxable
acquisition</header><text>For purposes of this section—</text>
<paragraph id="idAC014154B77A4970B9F3761192C61355"><enum>(1)</enum><header>In
general</header><text>The term <term>taxable acquisition</term> means the
acquisition of any direct or indirect interest in an applicable insurance
contract by—</text>
<subparagraph id="idA0624FD0E0F44611B398EC455065C5F7"><enum>(A)</enum><text>an applicable
exempt organization, or</text>
</subparagraph><subparagraph id="id6EF93C6123164C258927CE138533B01B"><enum>(B)</enum><text>a person other
than an applicable exempt organization if such interest in the hands of such
person is not an interest described in clause (i), (ii), (iii), or (iv) of
paragraph (2)(B).</text>
</subparagraph></paragraph><paragraph id="id2312937A5D0D457CB0E1649A52F419EC"><enum>(2)</enum><header>Applicable
insurance contract</header>
<subparagraph id="id5A291B4A0C0746CB994751E0C9D3FB9A"><enum>(A)</enum><header>In
general</header><text>The term <term>applicable insurance contract</term> means
any life insurance, annuity, or endowment contract with respect to which both
an applicable exempt organization and a person other than an applicable exempt
organization have directly or indirectly held an interest in the contract
(whether or not at the same time).</text>
</subparagraph><subparagraph id="idA636E2F1C7A24B12937D581CF55FE4AD"><enum>(B)</enum><header>Exceptions</header><text>Such
term shall not include a life insurance, annuity, or endowment contract
if—</text>
<clause id="idBDF869CE08854B779185E14B111F7D16"><enum>(i)</enum><text>all persons
directly or indirectly holding any interest in the contract (other than
applicable exempt organizations) have an insurable interest in the insured
under the contract independent of any interest of an applicable exempt
organization in the contract,</text>
</clause><clause id="id2CFFEBE9E6BE4CA6AA57DC70DE54F9EF"><enum>(ii)</enum><text>the sole
interest in the contract of each person other than an applicable exempt
organization is as a named beneficiary,</text>
</clause><clause id="id5C9A3EA477A54E64B3A0AC774074640C"><enum>(iii)</enum><text>the sole
interest in the contract of each person other than an applicable exempt
organization is—</text>
<subclause id="idB49388457C6D4A668687C0667198EE16"><enum>(I)</enum><text>as a beneficiary
of a trust holding an interest in the contract, but only if the person's
designation as such beneficiary was made without consideration and solely on a
purely gratuitous basis, or</text>
</subclause><subclause id="id6D3E5DDB598F436698402D3AFEB686A7"><enum>(II)</enum><text>as a trustee who
holds an interest in the contract in a fiduciary capacity solely for the
benefit of applicable exempt organizations or persons otherwise described in
clauses (i), (ii), and (iv) or subclause (I) of this clause, or</text>
</subclause></clause><clause id="id4B6D047B53044A5F959A19F8E4F884AF"><enum>(iv)</enum><text>except as
provided in subparagraph (C), the sole interest in the contract of each person
other than an applicable exempt organization is as a lender with respect to the
contract and the contract covers only 1 individual and such individual is an
officer, director, or employee of the applicable exempt organization with an
interest in the contract.</text>
</clause></subparagraph><subparagraph id="id4F66BDBC02C64BC2BF87B6FB7A3AC967"><enum>(C)</enum><header>Restrictions on
exception for lenders</header>
<clause id="id5526446191EE45C693491B5008EABE10"><enum>(i)</enum><header>Numerical
limit</header><text>The number of contracts that may be taken into account
under subparagraph (B)(iv) with respect to officers, directors, or employees of
the applicable exempt organization with interests in the contracts shall not
exceed the greater of—</text>
<subclause id="id243EAD047B2247F1983C6A454BF36D5F"><enum>(I)</enum><text>the lesser of 5
percent of the total officers, directors, and employees of the organization or
20, or</text>
</subclause><subclause id="id4D23E1517AA148D69FF1149432BC5A09"><enum>(II)</enum><text>5.</text>
</subclause></clause><clause id="idCB2F7D2A173040FDBD013A557ECDB3AC"><enum>(ii)</enum><header>Aggregate
indebtedness</header><text>The exception under subparagraph (B)(iv) shall apply
only to the extent that the aggregate amount of the indebtedness with respect
to 1 or more contracts covering a single individual does not exceed
$50,000.</text>
</clause></subparagraph><subparagraph id="idD06788819B164E439830538AA0F89D75"><enum>(D)</enum><header>Secretarial
authority</header><text>The Secretary may exempt a contract from treatment as
an applicable insurance contract based on specific factors, including factors
such as whether the transaction is at arms length, whether economic benefits to
the applicable exempt organization substantially exceed the economic benefits
to all other persons with an interest in the contract (determined without
regard to whether, or the extent to which, such organization has paid or
contributed with respect to the contract), and the likelihood of abuse.</text>
</subparagraph></paragraph><paragraph id="idF760E0FC926D4BC4922C888DEDF8332A"><enum>(3)</enum><header>Definition and
rule relating to acquisition costs</header>
<subparagraph id="id9B40DE88573849AFB1A14EF6BDD99CC8"><enum>(A)</enum><header>Acquisition
costs defined</header><text>The term <term>acquisition costs</term> means the
direct or indirect costs of acquiring an interest in an applicable insurance
contract. Such term shall include any fees, commissions, charges, or other
amounts paid in connection with the acquisition, whether or not paid to the
issuer of the contract.</text>
</subparagraph><subparagraph id="id9E5C14FCB2174586BC9A6C68A27F8351"><enum>(B)</enum><header>Timing of
payments</header><text>Except as provided in regulations, if acquisition costs
of any acquisition are paid or incurred in more than 1 calendar year, the tax
imposed by subsection (a) with respect to the acquisition shall be imposed each
time the costs are so paid or incurred.</text>
</subparagraph></paragraph><paragraph id="id5BEDFE2D3B1E424796C78065675D5A56"><enum>(4)</enum><header>Rules relating
to interests</header>
<subparagraph id="idEBE31B5096D34DF59B618B338781958F"><enum>(A)</enum><header>In
general</header><text>An interest in the contract includes any right with
respect to the contract, whether as an owner, beneficiary, or otherwise.</text>
</subparagraph><subparagraph id="id9C1A90863A1340B1A5B8BF33D9932C14"><enum>(B)</enum><header>Indirect
interests</header>
<clause id="id2BF9C129ECF54B228E2487DD04A13DAC"><enum>(i)</enum><header>In
general</header><text>Except as provided in clause (ii), an indirect interest
in a contract includes an interest in an entity which directly or indirectly
holds an interest in the contract.</text>
</clause><clause id="id21D031480FDD468DA39C5F6E0A9235D8"><enum>(ii)</enum><header>Portfolio
investments</header><text>If an applicable exempt organization holds an
interest in a contract solely because the organization holds, as part of a
diversified investment strategy, a de minimis interest in an entity which
directly or indirectly holds the interest in the contract, such indirect
interest in the contract shall not be taken into account for purposes of this
section.</text>
</clause></subparagraph><subparagraph id="id3765D3A0CD8B492A8DD8809662BB25D8"><enum>(C)</enum><header>Exchanged
contracts</header><text>In the case of an exchange of an applicable insurance
contract on which no gain or loss is recognized under section 1035, any
interest in any of the contracts involved in the exchange shall be treated as
an interest in all such contracts.</text>
</subparagraph></paragraph><paragraph id="id876A0AB7BF7F42239A350583183120FE"><enum>(5)</enum><header>Increase in
interest</header><text>If a person increases an interest in an applicable
insurance contract, the increase shall be treated as a separate acquisition for
purposes of this section.</text>
</paragraph><paragraph id="idE8A77DD3089F4C1F8C8EE03BDFCF7D2A"><enum>(6)</enum><header>Prior
acquisitions</header><text>Except as provided in regulations, if a person
acquires an interest in a contract before the contract is treated as an
applicable insurance contract, the acquisition shall be treated as a taxable
acquisition of an interest in an applicable insurance contract as of the date
the contract becomes an applicable insurance contract.</text>
</paragraph></subsection><subsection id="id4040B3F96A15451A91633A5DB19FA218"><enum>(c)</enum><header>Applicable
exempt organization</header><text>For purposes of this section, the term
<term>applicable exempt organization</term> means—</text>
<paragraph id="id3EFFEA0D7A994598BE997595DD22AEF3"><enum>(1)</enum><text>an organization
described in section 170(c),</text>
</paragraph><paragraph id="id442204A06E594DD48D6A6D78192FB145"><enum>(2)</enum><text>an organization
described in section 168(h)(2)(A)(iv), or</text>
</paragraph><paragraph id="id5F8A8A696B6442399BCD9BF56515B861"><enum>(3)</enum><text>an organization
not described in paragraph (1) or (2) which is described in section 2055(a) or
section 2522(a).</text>
</paragraph></subsection><subsection id="id1633E56E2BCB4211B5F73747A42BF827"><enum>(d)</enum><header>Tax not treated
as investment in the contract</header><text>For purposes of section 72, the tax
imposed by this section shall not be included in investment in the
contract.</text>
</subsection><subsection id="id612250F6AFA546098B03C81D27EDB596"><enum>(e)</enum><header>Regulations</header><text>The
Secretary shall prescribe such regulations as may be necessary to carry out the
provisions of this section. Such regulations may include regulations
which—</text>
<paragraph id="idC161B0A7CBA54E0DAB1AF79F205DAACF"><enum>(1)</enum><text>provide, for
purposes of subsection (b)(6), appropriate rules for the application of this
section in any case where an interest is acquired before a contract becomes an
applicable insurance contract,</text>
</paragraph><paragraph id="idA2F9E8B42AF244728E497205A49FD45F"><enum>(2)</enum><text>prevent, in cases
the Secretary determines appropriate, the imposition of more than one tax under
this section if the same interest is acquired more than once, and</text>
</paragraph><paragraph id="id642A06FF0093487790C8A02D49ACE85F"><enum>(3)</enum><text>are designed to
prevent avoidance of the purposes of this section, including through the use of
intermediaries.</text>
</paragraph></subsection></section><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph><paragraph id="id1F40BFC5A0144606BB94272B8B6CEC32"><enum>(2)</enum><header>Conforming
amendment</header><text>The table of sections for subchapter F of chapter 42,
as added by this Act, is amended by adding at the end the following new
item:</text>
<quoted-block display-inline="no-display-inline" id="idDDD179B0064F4D65BB8F88240B10ACD5" style="OLC">
<toc>
<toc-entry level="section">Sec. 4966. Excise tax on acquisition of
interests in insurance contracts in which certain exempt organizations hold an
interest.</toc-entry>
</toc>
<after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph></subsection><subsection id="id1745D5452DFC4941A385FC38807FA393"><enum>(b)</enum><header>Reporting
requirements</header>
<paragraph id="id2D0E64511F12433B9023CCFC813081E3"><enum>(1)</enum><header>In
general</header><text>Subpart B of part III of subchapter A of chapter 61
(relating to information concerning transactions with other persons), as
amended by this Act, is amended by adding at the end the following new
section:</text>
<quoted-block display-inline="no-display-inline" id="idD30838643E914EC18A40F797F7ABE67D" style="OLC">
<section id="id1C930E703C094598BC01A69D9342E7CB"><enum>6050V.</enum><header>Returns
relating to applicable insurance contracts in which certain exempt
organizations hold interests</header>
<subsection id="id771A0AABE5034AB58DB211AEB68C0AF3"><enum>(a)</enum><header>Requirements of
reporting</header>
<paragraph id="id47C44AF6BB514A9C8D867AFD03659063"><enum>(1)</enum><header>Exempt
organizations</header><text>Each—</text>
<subparagraph id="id2CCDB174CC444670928E88248A658FF3"><enum>(A)</enum><text>applicable exempt
organization which acquires (within the meaning of section 4966) an interest in
any applicable insurance contract, and</text>
</subparagraph><subparagraph id="id63A77FF69CAB4FB5B8F39AFE29B7C1FE"><enum>(B)</enum><text>other person
which makes an acquisition of such an interest if such acquisition is taxable
under section 4966,</text>
</subparagraph><continuation-text continuation-text-level="paragraph">shall make
the return described in subsection (c).</continuation-text></paragraph><paragraph id="idA8DA98ECE70A449B989B9165000DC0A0"><enum>(2)</enum><header>Transfers</header><text>If
a person (including an applicable exempt organization) acquires an interest in
an applicable insurance contract in an acquisition which is taxable under
section 4966 and then transfers such interest to 1 or more other persons, each
person acquiring all or a portion of such interest shall make the return
described in subsection (c).</text>
</paragraph></subsection><subsection id="id3DA0A4631596446DA743E20CA568394C"><enum>(b)</enum><header>Time for making
return</header><text>Any organization or person required to make a return under
subsection (a) shall file such return at such time as may be established by the
Secretary with respect to—</text>
<paragraph id="idF2D34B64F06843C4813972ED5BF52766"><enum>(1)</enum><text>in the case of a
person described in subsection (a)(1), the calendar year in which the
acquisition occurs, any calendar year in which acquisition costs are paid or
incurred, and any other calendar years specified by the Secretary, and</text>
</paragraph><paragraph id="idA912D2F742384B2FA0D137D95FB9A8B2"><enum>(2)</enum><text>in the case of a
person described in subsection (a)(2), the calendar year in which the transfer
occurs.</text>
</paragraph></subsection><subsection id="id0C78BC72473646D39B9EA754EBB01EF7"><enum>(c)</enum><header>Form and manner
of returns</header><text>A return is described in this subsection if such
return—</text>
<paragraph id="id0533D8A2F1E44B5AA09EE2761820B19B"><enum>(1)</enum><text>is in such form
as the Secretary prescribes,</text>
</paragraph><paragraph id="id66B96DBDBFE94683A055B5500DBF77B4"><enum>(2)</enum><text>in the case
of—</text>
<subparagraph id="id6593B4B1D1504667A93F26A9FCA4CA11"><enum>(A)</enum><text>a return required
under subsection (a)(1)(A), contains the name, address, and taxpayer
identification number of the applicable exempt organization, the issuer of the
applicable insurance contract, and any person acquiring an interest in the
contract if the acquisition is taxable under section 4966,</text>
</subparagraph><subparagraph id="id3347F38DAB6F4B0FA8FBA0D361045747"><enum>(B)</enum><text>a return required
under subsection (a)(1)(B), contains the name, address, and taxpayer
identification number of the person acquiring an interest in the applicable
insurance contract if the acquisition is taxable under section 4966, any
applicable exempt organization holding an interest in the contract, and the
issuer of the contract, and</text>
</subparagraph><subparagraph id="id023E929DA67248458B8342A8626C2500"><enum>(C)</enum><text>a return required
under subsection (a)(2), contains the name, address, and taxpayer
identification number of the transferor and transferee, and</text>
</subparagraph></paragraph><paragraph id="id848C337E3CA546A8B5553AC410C22F4B"><enum>(3)</enum><text>contains such
other information as the Secretary may prescribe.</text>
</paragraph></subsection><subsection id="idFEE702E19C1543C683492D2888932F6E"><enum>(d)</enum><header>Statements To
be furnished to persons with respect to whom information is
required</header><text>Every person required to make a return under subsection
(a) shall furnish to each person whose taxpayer identification information is
required to be included in such return under subsection (c) a written statement
showing—</text>
<paragraph id="id9770A456437E41F3B44693F297ABFAA5"><enum>(1)</enum><text>the name and
address of the person required to make such return and the telephone number of
the information contact for such person, and</text>
</paragraph><paragraph id="id779730BECA24472C80871B1B68ECA8A9"><enum>(2)</enum><text>the taxpayer
identity and other information required to be shown on the return with respect
to such person.</text>
</paragraph><continuation-text continuation-text-level="subsection">The
written statement required under the preceding sentence shall be furnished on
or before the date specified by the Secretary.</continuation-text></subsection><subsection id="idECC7048C7A4B4DE2AE7752B265E93EEC"><enum>(e)</enum><header>Definitions</header><text>For
purposes of this section, any term used in this section which is also used in
section 4966 shall have the meaning given such term by section
4966.</text>
</subsection></section><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph><paragraph id="idDAE126461B514E59ADCC7B374AA073DC"><enum>(2)</enum><header>Penalties</header>
<subparagraph id="id12E179CE60F14A37B6032DA2041CF0B2"><enum>(A)</enum><header>In
general</header><text>Section 6724(d) is amended—</text>
<clause id="id081F6E288BCB41A2A46B9B68F9F3EA88"><enum>(i)</enum><text>in
paragraph (1)(B), by redesignating clauses (xiii) through (xviii) as clauses
(xiv) through (xix) and by inserting after clause (xii) the following new
clause:</text>
<quoted-block display-inline="no-display-inline" id="id95FA55EE04EB49989A5D3A348B15C41D" style="OLC">
<clause id="id55EE28F8397949939D6384958AB507E7"><enum>(xiii)</enum><text>section 6050V
(relating to returns relating to applicable insurance contracts in which
certain exempt organizations hold
interests),</text>
</clause><after-quoted-block>,
and</after-quoted-block></quoted-block>
</clause><clause id="id6C785FA60BC34021A639BAECF6BE4C5D"><enum>(ii)</enum><text>in
paragraph (3), by striking <quote>and</quote> at the end of subparagraph (C),
by striking the period at the end of subparagraph (D) and inserting <quote>,
and</quote>, and by adding at the end the following new subparagraph:</text>
<quoted-block display-inline="no-display-inline" id="idAECD9B74082F4A568C5DB7BC40A60747" style="OLC">
<subparagraph id="idD2F052D0B19B4DAAAFD4291D21636BEF"><enum>(E)</enum><text>the statement
required by subsection (d) of section 6050V (relating to returns relating to
applicable insurance contracts in which certain exempt organizations hold
interests).</text>
</subparagraph><after-quoted-block>.</after-quoted-block></quoted-block>
</clause></subparagraph><subparagraph id="id676ACF5A772B46EEBD15FE87D444973C"><enum>(B)</enum><header>Intentional
disregard</header><text>Section 6721(e)(2) is amended by striking
<quote>or</quote> at the end of subparagraph (B), by striking
<quote>and</quote> at the end of subparagraph (C) and inserting
<quote>or</quote>, and by adding at the end the following new
subparagraph:</text>
<quoted-block display-inline="no-display-inline" id="id1A6F3854504246779A576C4F53D713F5" style="OLC">
<subparagraph id="idABD989F70EFF4561B1B3598A98693024"><enum>(D)</enum><text>in the case of a
return required to be filed under section 6050V, the amount of tax imposed
under section 4966 which has not been paid with respect to items required to be
included on the return,
and</text>
</subparagraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subparagraph></paragraph><paragraph id="id165BE59ECBEE48D3A14CB59644C39347"><enum>(3)</enum><header>Conforming
amendment</header><text>The table of sections for subpart B of part III of
subchapter A of chapter 61, as amended by this Act, is amended by adding at the
end the following new item:</text>
<quoted-block display-inline="no-display-inline" id="id8E9AB29D0313446390AC3B4D08E389FA" style="OLC">
<toc>
<toc-entry level="section">Sec. 6050V. Returns relating to applicable
insurance contracts in which certain exempt organizations hold
interests.</toc-entry>
</toc>
<after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph></subsection><subsection id="id351E2A68CAE04BD88E3257280952C713"><enum>(c)</enum><header>Effective
date</header>
<paragraph id="idD99DB9E328C44B2BADFF2BFC09864677"><enum>(1)</enum><header>In
general</header><text>The amendments made by this section shall apply to
contracts issued after May 3, 2005.</text>
</paragraph><paragraph id="idCBACD194C8F04E9DA9BEDFEF7BE52561"><enum>(2)</enum><header>Reporting of
existing contracts</header><text>In the case of any life insurance, annuity, or
endowment contract—</text>
<subparagraph id="id8C2B7AB0003941059173CC75F14A89B6"><enum>(A)</enum><text>which was issued
on or before May 3, 2005,</text>
</subparagraph><subparagraph id="idB9BA87498B5E46A5AF238396530548F9"><enum>(B)</enum><text>with respect to
which an applicable exempt organization (as defined in section 4966 of the
Internal Revenue Code of 1986, as added by this section) holds an interest on
May 3, 2005, and</text>
</subparagraph><subparagraph id="idB09BB6640991487DB0CD301A2E317F3A"><enum>(C)</enum><text>which would be
treated as an applicable insurance contract (as so defined) if issued after May
3, 2005,</text>
</subparagraph><continuation-text commented="no" continuation-text-level="paragraph">such organization shall, not later
than the date which is 1 year after the date of the enactment of this Act,
report to the Secretary of the Treasury with respect to such contract. Such
report shall be in such form and manner, and contain such information, as the
Secretary may prescribe. The Secretary shall submit such reports, along with
any recommendations for legislation as the Secretary considers appropriate, to
the Committee on Ways and Means of the House of Representatives and to the
Committee on Finance of the Senate within 6 months of the date such reports are
required to be filed.</continuation-text></paragraph></subsection></section><section id="ID2E611C0BBE5A44ADA9C67C857A90F62E"><enum>313.</enum><header>Increase in
penalty excise taxes on public charities, social welfare organizations, and
private foundations</header>
<subsection id="ID836DDF9D9A0E4947A3B25D0302717693"><enum>(a)</enum><header>Taxes on
self-dealing and excess benefit transactions</header>
<paragraph id="ID030CF2A614CE4E5D86095557665A98CC"><enum>(1)</enum><header>In
general</header><text>Section 4941(a) (relating to initial taxes) is
amended—</text>
<subparagraph id="ID1C27D2E829A648ED983DF0B4E1A7A237"><enum>(A)</enum><text>in paragraph (1),
by striking <quote>5 percent</quote> and inserting <quote>10 percent</quote>,
and</text>
</subparagraph><subparagraph id="ID65C36852847444438864E6292E4AB263"><enum>(B)</enum><text>in paragraph (2),
by striking <quote>2<fraction>1/2</fraction> percent</quote> and inserting
<quote>5 percent</quote>.</text>
</subparagraph></paragraph><paragraph id="IDC7AC5E035D074FBEBF929305E455A5D4"><enum>(2)</enum><header>Increase in tax
if self-dealing includes compensation to disqualified
person</header><text>Section 4941(a)(1) is amended by adding at the end the
following new sentence: <quote>If the act of self-dealing includes acts
described in subsection (d)(1)(D), <quote>25 percent</quote> shall be
substituted for <quote>10 percent</quote>, except that the Secretary may abate
under section 4962 (determined without regard to the exception under subsection
(b) thereof) not more than 15 percentage points of such tax.</quote>.</text>
</paragraph><paragraph id="ID03F58B30A4EB4142B564DD2F50868269"><enum>(3)</enum><header>Increased
limitation for managers on self-dealing</header><text>Section 4941(c)(2) is
amended by striking <quote>$10,000</quote> each place it appears in the text
and in the heading and inserting <quote>$20,000</quote>.</text>
</paragraph><paragraph id="idDC028B6F27BA4703BF4FB272F1C032DC"><enum>(4)</enum><header>Increased
limitation for managers on excess benefit transactions</header><text>Section
4958(d)(2) is amended by striking <quote>$10,000</quote> and inserting
<quote>$20,000</quote>.</text>
</paragraph></subsection><subsection id="ID424E7F4DEFC248FCA044A05795F3B1D8"><enum>(b)</enum><header>Taxes on
Failure To Distribute Income</header><text>Section 4942(a) (relating to initial
tax) is amended by striking <quote>15 percent</quote> and inserting <quote>30
percent</quote>.</text>
</subsection><subsection id="ID8AD7E46A41494614995B6278723F86BB"><enum>(c)</enum><header>Taxes on Excess
Business Holdings</header><text>Section 4943(a)(1) (relating to imposition) is
amended by striking <quote>5 percent</quote> and inserting <quote>10
percent</quote>.</text>
</subsection><subsection id="ID7F9C4D64743E4174963C7BCAA65F4B5E"><enum>(d)</enum><header>Taxes on
Investments Which Jeopardize Charitable Purpose</header>
<paragraph id="ID122012B7F8BE4DC594D4B8DCC2263C51"><enum>(1)</enum><header>In
general</header><text>Section 4944(a) (relating to initial taxes) is amended by
striking <quote>5 percent</quote> both places it appears and inserting
<quote>10 percent</quote>.</text>
</paragraph><paragraph id="idEDA411B383C04BBC9CEBE333C92D56C3"><enum>(2)</enum><header>Increased
limitation for managers</header><text>Section 4944(d)(2) is amended—</text>
<subparagraph id="idCD247ABB1419482E95C2B6BD3C0E054B"><enum>(A)</enum><text>by striking
<quote>$5,000,</quote> and inserting <quote>$10,000,</quote>, and</text>
</subparagraph><subparagraph id="idE67B0D70BA614B8C82E78D4A287DD3B9"><enum>(B)</enum><text>by striking
<quote>$10,000.</quote> and inserting <quote>$20,000.</quote>.</text>
</subparagraph></paragraph></subsection><subsection id="IDF4C24C9314A243279E5ACC68832237A8"><enum>(e)</enum><header>Taxes on
Taxable Expenditures</header>
<paragraph id="ID6E9A499AF09543F68DDDC0238459FF61"><enum>(1)</enum><header>In
general</header><text>Section 4945(a) (relating to initial taxes) is
amended—</text>
<subparagraph id="IDF3660A5F17044A179A5F11B53A855239"><enum>(A)</enum><text>in paragraph (1),
by striking <quote>10 percent</quote> and inserting <quote>20 percent</quote>,
and</text>
</subparagraph><subparagraph id="ID494B6A75E99043DAA5167E9EC33A3417"><enum>(B)</enum><text>in paragraph (2),
by striking <quote>2<fraction>1/2</fraction> percent</quote> and inserting
<quote>5 percent</quote>.</text>
</subparagraph></paragraph><paragraph id="id999A1C3A96D34AD19B7101EE86E673DD"><enum>(2)</enum><header>Increased
limitation for managers</header><text>Section 4945(c)(2) is amended—</text>
<subparagraph id="idD337F189C8B94D518DCC984D206F5B46"><enum>(A)</enum><text>by striking
<quote>$5,000,</quote> and inserting <quote>$10,000,</quote>, and</text>
</subparagraph><subparagraph commented="no" display-inline="no-display-inline" id="id682A654AD033498498F17797B3673FD7"><enum>(B)</enum><text>by striking
<quote>$10,000.</quote> and inserting <quote>$20,000.</quote>.</text>
</subparagraph></paragraph></subsection><subsection commented="no" display-inline="no-display-inline" id="ID2F9F9529B9B844BA821B8F64EB267BE7"><enum>(f)</enum><header>Effective
Date</header><text>The amendments made by this section shall apply to taxable
years beginning after the date of the enactment of this Act.</text>
</subsection></section><section id="id9E3AC2F008364B5EB3CEF8BE650448B8"><enum>314.</enum><header>Reform of
charitable contributions of certain easements on buildings in registered
historic districts</header>
<subsection id="id122B5227FBB842ECB4F04650682966B3"><enum>(a)</enum><header>Special rules
with respect to buildings in registered historic districts</header>
<paragraph id="idAA284F32F3DB4B1D80A4729B726BB972"><enum>(1)</enum><header>In
general</header><text>Paragraph (4) of section 170(h) (relating to definition
of conservation purpose) is amended by redesignating subparagraph (B) as
subparagraph (C) and by inserting after subparagraph (A) the following new
subparagraph:</text>
<quoted-block display-inline="no-display-inline" id="idF375122719844DCE84F24F8837D6B992" style="OLC">
<subparagraph id="idB6D74DB9140649D491325A4D902901DD"><enum>(B)</enum><header>Special rules
with respect to buildings in registered historic districts</header><text>In the
case of any contribution of a qualified real property interest which is a
restriction with respect to the exterior of a building described in
subparagraph (C)(ii), such contribution shall not be considered to be
exclusively for conservation purposes unless—</text>
<clause id="id2535A1941D9D4DBEB214E3AD91C91770"><enum>(i)</enum><text>such
interest—</text>
<subclause id="id6405A12DE7FA48F89220283A731F04DE"><enum>(I)</enum><text>includes a
restriction which preserves the entire exterior of the building (including the
front, sides, rear, and height of the building), and</text>
</subclause><subclause id="id4864637CD9FE433B9FD4ECF837E589C5"><enum>(II)</enum><text>prohibits any
change in the exterior of the building which is inconsistent with the
historical character of such exterior,</text>
</subclause></clause><clause commented="no" display-inline="no-display-inline" id="idB9B2CCE476184AF29A1161C3F4E76149"><enum>(ii)</enum><text display-inline="yes-display-inline">the donor and donee enter into a written
agreement certifying, under penalty of perjury, that the donee—</text>
<subclause commented="no" display-inline="no-display-inline" id="id1467090BED28427FABB54CC00E1CE383"><enum>(I)</enum><text display-inline="yes-display-inline">is a qualified organization (as defined in
paragraph (3)) with a purpose of environmental protection, land conservation,
open space preservation, or historic preservation, and</text>
</subclause><subclause commented="no" display-inline="no-display-inline" id="idE148B134819A4B07AF6244AAE22F0D8E"><enum>(II)</enum><text display-inline="yes-display-inline">has the resources to manage and enforce the
restriction and a commitment to do so, and</text>
</subclause></clause><clause id="id5579A75ABAA840519C21E101CE286935"><enum>(iii)</enum><text>in the case of
any contribution made in a taxable year beginning after the date of the
enactment of this subparagraph, the taxpayer includes with the taxpayer's
return for the taxable year of the contribution—</text>
<subclause id="id6F2A81D6D65746BDA2FBBDE069E59840"><enum>(I)</enum><text>a qualified
appraisal (within the meaning of subsection (f)(11)(E)) of the qualified
property interest,</text>
</subclause><subclause id="id8C3F2C7AAF8D4650818104140394FD24"><enum>(II)</enum><text>photographs of
the entire exterior of the building, and</text>
</subclause><subclause id="idC301F246FCAD46A18D05BC506CC23EB0"><enum>(III)</enum><text>a description
of all restrictions on the development of the
building.</text>
</subclause></clause></subparagraph><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph></subsection><subsection id="idED7FF315983245A4945DF6B320E280B5"><enum>(b)</enum><header>Disallowance of
deduction for structures and land in registered historic
districts</header><text>Subparagraph (C) of section 170(h)(4), as redesignated
by subsection (a), is amended—</text>
<paragraph id="idCA880D1465A34B99BAA990EFE90D88A0"><enum>(1)</enum><text>by striking
<quote>any building, structure, or land area which</quote>,</text>
</paragraph><paragraph id="id85F685E2A84F41F9AA3D95B0B33AFBAC"><enum>(2)</enum><text>by inserting
<quote>any building, structure, or land area which</quote> before <quote>is
listed</quote> in clause (i), and</text>
</paragraph><paragraph commented="no" display-inline="no-display-inline" id="idB2C7B7DD28FB48D2835B437F377B8095"><enum>(3)</enum><text>by inserting
<quote>any building which</quote> before <quote>is located</quote> in clause
(ii).</text>
</paragraph></subsection><subsection id="id25C9D08AC6D6439AB7C4B2C777BC08D1"><enum>(c)</enum><header>Filing fee for
certain contributions</header><text>Subsection (f) of section 170 (relating to
disallowance of deduction in certain cases and special rules) is amended by
inserting at the end the following new paragraph:</text>
<quoted-block display-inline="no-display-inline" id="id341A04B38E5241539713941C37D74B40" style="OLC">
<paragraph id="id0E0FF82F0E474741B99C7554ABA63148"><enum>(13)</enum><header>Contributions
of certain interests in buildings located in registered historic
districts</header>
<subparagraph id="id21E31E26DB2E463FAC27E0F7724ECEDB"><enum>(A)</enum><header>In
general</header><text>No deduction shall be allowed with respect to any
contribution described in subparagraph (B) unless the taxpayer includes with
the return for the taxable year of the contribution a $500 filing fee.</text>
</subparagraph><subparagraph id="id828AE5E00B0F4BBDAC7DBDB245822229"><enum>(B)</enum><header>Contribution
described</header><text>A contribution is described in this subparagraph if
such contribution is a qualified conservation contribution (as defined in
subsection (h)) which is a restriction with respect to the exterior of a
building described in subsection (h)(4)(C)(ii) and for which a deduction is
claimed in excess of the greater of—</text>
<clause id="idC80AED081C9A467395302809A6DADB47"><enum>(i)</enum><text>3
percent of the fair market value of the building (determined immediately before
such contribution), or</text>
</clause><clause id="id6ACCB302F0D44170BD005C327A420A22"><enum>(ii)</enum><text>$10,000.</text>
</clause></subparagraph><subparagraph id="id99552BE930C0421BA8DCB0CCD699A374"><enum>(C)</enum><header>Dedication of
fee</header><text>Any fee collected under this paragraph shall be used for the
enforcement of the provisions of subsection
(h).</text>
</subparagraph></paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="id8B1027C21DE44EC09EB0BABBB525448D"><enum>(d)</enum><header>Effective
date</header>
<paragraph commented="no" display-inline="no-display-inline" id="id68E2D96BBEE7428FA38F84FC936AF065"><enum>(1)</enum><header>Special rules
for buildings in registered historic districts</header><text>The amendments
made by subsection (a) shall apply to contributions made after November 15,
2005.</text>
</paragraph><paragraph commented="no" display-inline="no-display-inline" id="idFDFFF206CED64B0FB2EB37F79D9E726C"><enum>(2)</enum><header>Disallowance of
deduction for structures and land</header><text>The amendments made by
subsection (b) shall apply to contributions made after the date of the
enactment of this Act.</text>
</paragraph><paragraph commented="no" display-inline="no-display-inline" id="id3F65266A60364007BE06C2F45BAB521E"><enum>(3)</enum><header>Filing
fee</header><text>The amendment made by subsection (c) shall apply to
contributions made 180 days after the date of the enactment of this Act.</text>
</paragraph></subsection></section><section id="idC2DC3B8A9E99411E89027299C8DC55A1"><enum>315.</enum><header>Charitable
contributions of taxidermy property</header>
<subsection id="idD9E537247175442A9EF4024D91344EA3"><enum>(a)</enum><header>In
general</header><text>Subsection (f) of section 170, as amended by section 314
of this Act, is amended by adding at the end the following new
paragraph:</text>
<quoted-block display-inline="no-display-inline" id="id88DA18063F334062AC7C0C3A8B380530" style="OLC">
<paragraph id="idA7F13BBA15704C8C9C7F87870FB6CC06"><enum>(14)</enum><header>Contributions
of taxidermy property</header>
<subparagraph id="id8E6D59412770465F84E73CDBC7A4A786"><enum>(A)</enum><header>Contributions
of more than $500</header><text>In the case of any contribution of taxidermy
property for which a deduction of more than $500 is claimed, no deduction shall
be allowed under subsection (a) unless the donor includes with the return for
the taxable year in which the contribution is made a photograph of the
taxidermy property and data with respect to the sales prices of similar
taxidermy property.</text>
</subparagraph><subparagraph id="id3EE50517484740E6948442B70B7B2711"><enum>(B)</enum><header>Contributions
of more than $5,000</header><text>In the case of any contribution of taxidermy
property for which a deduction of more than $5,000 is claimed, no deduction
shall be allowed under subsection (a) unless the donor—</text>
<clause id="id0F8C59D3E56540A1ACCBFD48478D374B"><enum>(i)</enum><text>notifies the
Internal Revenue Service of such deduction, and</text>
</clause><clause id="idB619C0B2615646E3AFABC776F63A87D5"><enum>(ii)</enum><text>includes with
the return for the taxable year in which the contribution is made—</text>
<subclause id="id4E0223B638774E2A8C451EBC6FDB97CF"><enum>(I)</enum><text>a statement of
value from the Internal Revenue Service, or</text>
</subclause><subclause id="id3AB157280F164327B3C0162327EEEC68"><enum>(II)</enum><text>a request for a
statement of value from the Internal Revenue Service and a $500 fee.</text>
</subclause></clause></subparagraph><subparagraph id="id75D33666ECD04D92A7FC40795DB1E06A"><enum>(C)</enum><header>Taxidermy
property</header><text>For purposes of this section, the term <term>taxidermy
property</term> means a mounted work of art which contains any part of a dead
animal.</text>
</subparagraph></paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection commented="no" display-inline="no-display-inline" id="id3058901D6CBD4ACD86A58DA024651115"><enum>(b)</enum><header>Effective
date</header><text>The amendment made by this section shall apply to
contributions made after November 15, 2005.</text>
</subsection></section><section id="ID6B80EE74849F45919A8A5448700ABAE3"><enum>316.</enum><header>Recapture of
tax benefit for charitable contributions of exempt use property not used for an
exempt use</header>
<subsection id="IDBE8699917E38411B9C099C308B1A6162"><enum>(a)</enum><header>Recapture of
deduction on certain sales of exempt use property</header>
<paragraph id="idB8951B21D67A446AA0BF21612D1B1D80"><enum>(1)</enum><header>In
general</header><text>Clause (i) of section 170(e)(1)(B) (related to certain
contributions of ordinary income and capital gain property) is amended to read
as follows:</text>
<quoted-block display-inline="no-display-inline" id="id8226C4107B1641AFB955DACBDB20732B" style="OLC">
<clause id="id0E3134E910FF4E6498E18599A32FF4C5"><enum>(i)</enum><text>of tangible
personal property—</text>
<subclause id="idEE0E575B4C164109BB0C7AC497777249"><enum>(I)</enum><text>if the use by the
donee is unrelated to the purpose or function constituting the basis for its
exemption under section 501 (or, in the case of a governmental unit, to any
purpose or function described in subsection (c)), or</text>
</subclause><subclause id="idAA2D19246CF84155AB7AEF5F54A5D704"><enum>(II)</enum><text>which is
applicable property (as defined in paragraph (7)(C)) which is sold, exchanged,
or otherwise disposed of by the donee before the last day of the taxable year
in which the contribution was made and with respect to which the donee has not
made a certification in accordance with paragraph
(7)(D),</text>
</subclause></clause><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph><paragraph id="id1DF21C7A93544283B87E195EE62F08B1"><enum>(2)</enum><header>Dispositions
after close of taxable year</header><text>Section 170(e) is amended by adding
at the end the following new paragraph:</text>
<quoted-block id="IDDC53CCB7C58840D79242BE2DBD818740" style="OLC">
<paragraph id="IDE3201B6AEA0F4A4481273D51B7683C86"><enum>(7)</enum><header>Recapture of
deduction on certain dispositions of exempt use property</header>
<subparagraph id="ID090969C0A9DE4DB9885A45CCA2C148C0"><enum>(A)</enum><header>In
general</header><text>In the case of an applicable disposition of applicable
property, there shall be included in the income of the donor of such property
for the taxable year of such donor in which the applicable disposition occurs
an amount equal to the excess (if any) of—</text>
<clause id="ID2DEAA9C5FFA54FD0BB770AD1062BD8E9"><enum>(i)</enum><text>the amount of the
deduction allowed to the donor under this section with respect to such
property, over</text>
</clause><clause id="ID580E68ED07AE4D129C1189FF5DC05B20"><enum>(ii)</enum><text>the donor’s
basis in such property at the time such property was contributed.</text>
</clause></subparagraph><subparagraph id="IDC8354BA62A9242FF85D964921D33B6BE"><enum>(B)</enum><header>Applicable
disposition</header><text>For purposes of this paragraph, the term
<term>applicable disposition</term> means any sale, exchange, or other
disposition by the donee of applicable property—</text>
<clause id="id52AE36731FB44CB4827F9C2F575E4CF2"><enum>(i)</enum><text>after the last
day of the taxable year of the donor in which such property was contributed,
and</text>
</clause><clause id="idB02E93337156414393ED7D0584DA26AD"><enum>(ii)</enum><text>before the last
day of the 3-year period beginning on the date of the contribution of such
property,</text>
</clause><continuation-text continuation-text-level="subparagraph">unless
the donee makes a certification in accordance with subparagraph (D).</continuation-text></subparagraph><subparagraph id="idE33E213BCB6748E09E727A7E16B41D06"><enum>(C)</enum><header>Applicable
property</header><text>For purposes of this paragraph, the term
<term>applicable property</term> means charitable deduction property (as
defined in section 6050L(a)(2)(A))—</text>
<clause id="idA6A7560185A1473BAD5023316887A61E"><enum>(i)</enum><text>which is tangible
personal property the use of which is identified by the donee as related to the
purpose or function constituting the basis of the donee's exemption under
section 501, and</text>
</clause><clause id="idE47D951C05AF48199C8896F6D3BEF5AD"><enum>(ii)</enum><text>for which a
deduction in excess of the donor's basis is allowed.</text>
</clause></subparagraph><subparagraph id="id26551B08CA11472883CF3980FDEA3547"><enum>(D)</enum><header>Certification</header><text>A
certification meets the requirements of this subparagraph if it is a written
statement which is signed under penalty of perjury by an officer of the donee
organization and—</text>
<clause id="id4F81234B5628409AAE0DDA8B52C7D900"><enum>(i)</enum><text>which—</text>
<subclause id="id1A68F27BF8DB4E1BBA9F8F54F6034970"><enum>(I)</enum><text>certifies that
the use of the property by the donee was related to the purpose or function
constituting the basis for the donee’s exemption under section 501, and</text>
</subclause><subclause id="id2CF36F1F59024D9290C47FEF42EC12AC"><enum>(II)</enum><text>describes how
the property was used and how such use furthered such purpose or function,
or</text>
</subclause></clause><clause id="idE963B7FC853E4B44A04DC2EDAAD598F0"><enum>(ii)</enum><text>which—</text>
<subclause id="id79501D7AB913404DA4E60C4259E50434"><enum>(I)</enum><text>states the
intended use of the property by the donee at the time of the contribution,
and</text>
</subclause><subclause id="id01A8C3F3734841B7A7DC7D5C49BCF5D1"><enum>(II)</enum><text>certifies that
such intended use has become impossible or infeasible to
implement.</text>
</subclause></clause></subparagraph></paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph></subsection><subsection id="idAD45F5AD0F0B41EA90FF85CE18D9C6B8"><enum>(b)</enum><header>Reporting
Requirements</header><text>Paragraph (1) of section 6050L(a) (relating to
returns relating to certain dispositions of donated property) is
amended—</text>
<paragraph id="id2C29DBD5390D498DB7AD34C396272A42"><enum>(1)</enum><text>by striking
<quote>2 years</quote> and inserting <quote>3 years</quote>, and</text>
</paragraph><paragraph id="id9C54339BB772477698BABC221FC3A7A6"><enum>(2)</enum><text>by striking
<quote>and</quote> at the end of subparagraph (D), by striking the period at
the end of subparagraph (E) and inserting a comma, and by inserting at the end
the following:</text>
<quoted-block display-inline="no-display-inline" id="idA12B9DC679A64CBEB272EF566CB81A90" style="OLC">
<subparagraph id="idB56EC55E79E845DAB1D536ADC9C8F16D"><enum>(F)</enum><text>a description of
the donee’s use of the property, and</text>
</subparagraph><subparagraph id="id56317534D2E8495BA12E25A3DD8F447D"><enum>(G)</enum><text>a statement
indicating whether the use of the property was related to the purpose or
function constituting the basis for the donee's exemption under section
501.</text>
</subparagraph><quoted-block-continuation-text quoted-block-continuation-text-level="paragraph">In any
case in which the donee indicates that the use of applicable property (as
defined in section 170(e)(1)(C)) was related to the purpose or function
constituting the basis for the exemption of the donee under section 501 under
subparagraph (G), the donee shall include with the return the certification
described in section 170(e)(7)(D) if such certification is required under
section
170(e)(7).</quoted-block-continuation-text><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph></subsection><subsection id="idD9E363BF48AA42948B395676EFE1006E"><enum>(c)</enum><header>Penalty</header>
<paragraph id="id0A317B4C2C54468C9C6CD7871692B053"><enum>(1)</enum><header>In
general</header><text>Part I of subchapter B of chapter 68 (relating to
assessable penalties) is amended by inserting after section 6720A the following
new section:</text>
<quoted-block display-inline="no-display-inline" id="id9C0D478FC54542A1A80EDD4B4877CBAC" style="OLC">
<section id="id3AE235F16F684ED38C24E9E593D01552"><enum>6720B.</enum><header>Fraudulent
identification of exempt use property</header><text display-inline="no-display-inline">In addition to any criminal penalty provided
by law, any person who identifies applicable property (as defined in section
170(e)(7)(C)) as having a use which is related to a purpose or function
constituting the basis for the donee's exemption under section 501 and who
knows that such property is not intended for such a use shall pay a penalty of
$10,000.</text>
</section><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph><paragraph id="id17F7AAC91C9B4BB69D810776F57DD160"><enum>(2)</enum><header>Clerical
amendment</header><text>The table of sections for part I of subchapter B of
chapter 68 is amended by adding after the item relating to section 6720A the
following new item:</text>
<quoted-block id="idEC3027ADF9C948A5A89EA194B5DBC259" style="OLC">
<toc regeneration="no-regeneration">
<toc-entry level="section">Sec. 6720B. Fraudulent identification of
exempt use
property.</toc-entry>
</toc>
<after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph></subsection><subsection id="id3805E0C83F4641E4BD3FB84FE1418FBD"><enum>(d)</enum><header>Effective
date</header>
<paragraph id="idA5150F47BBEF4D60994D3BFDE65D7887"><enum>(1)</enum><header>Recapture</header><text>The
amendments made by subsection (a) shall apply to contributions after June 1,
2006.</text>
</paragraph><paragraph id="id1A1229F525E04AC89D43D40776A7988B"><enum>(2)</enum><header>Reporting</header><text>The
amendments made by subsection (b) shall apply to returns filed after June 1,
2006.</text>
</paragraph><paragraph id="id161C537B5E3D40958C9FB0B77F469F0F"><enum>(3)</enum><header>Penalty</header><text>The
amendments made by subsection (c) shall apply to identifications made after the
date of the enactment of this Act.</text>
</paragraph></subsection></section><section id="id0F73FF7857E04669B83DB246C2E1D425"><enum>317.</enum><header>Limitation of
deduction for charitable contributions of clothing and household items</header>
<subsection id="id939613D836754D5BA985F49C5204FC35"><enum>(a)</enum><header>In
general</header><text>Subsection (f) of section 170, as amended by section 315
of this Act, is amended by adding at the end the following new
paragraph:</text>
<quoted-block display-inline="no-display-inline" id="id469C4AA6809A4FEB821959431420491A" style="OLC">
<paragraph id="id4CCD08F8162E40E0A277336061B96199"><enum>(15)</enum><header>Contributions
of clothing and household items</header>
<subparagraph id="id9E529BA9D27A4608AB5DFB371DE94B6F"><enum>(A)</enum><header>In
general</header><text>In the case of an individual, partnership, or S
corporation, the deduction allowed under subsection (a) for any contribution of
clothing or household items with respect to which the donor has obtained a
qualified appraisal shall be—</text>
<clause id="id52C7BAF8EE864BDCB76D868E81E24485"><enum>(i)</enum><text>in the case of an
item which is in good used condition or better, no more than the amount
assigned to such item under subparagraph (B) for such year,</text>
</clause><clause id="id459C55BCDFCF4D34A7B3C670E69696DF"><enum>(ii)</enum><text>except as
provided by clause (iii), in the case of an item which is not in good used
condition or better, no more than 20 percent of the amount assigned to such
item under subparagraph (B) for such year, and</text>
</clause><clause id="id01B4793D276A42D8BDA90BCA2E813043"><enum>(iii)</enum><text>in the case of
an item which is not functional with respect to the use for which it was
designed, zero.</text>
</clause></subparagraph><subparagraph id="idD0857152B4914D72B0C6C097D36F8279"><enum>(B)</enum><header>Assigned
values</header><text>Each year the Secretary shall publish an itemized list of
clothing and household items and shall assign an amount with respect to each
item on the list which represents the fair market value of such item in good
used condition.</text>
</subparagraph><subparagraph id="id20828080F8694BDEB297C47C3BC6E151"><enum>(C)</enum><header>Exception for
items sold by the donee</header><text>Subparagraph (A) shall not apply to any
contribution of clothing or household items for which a deduction of more than
$500 is claimed if—</text>
<clause id="idA58D24CB18644BE681B37B9B9803CDBE"><enum>(i)</enum><text>the donee sells
the clothing or household items before the earlier of—</text>
<subclause id="id60D162C3B37D42CEA8CEF3E5B38E433D"><enum>(I)</enum><text>the due date
(including extensions) for filing the return of tax for the taxable year of the
donor in which the contribution was made, or</text>
</subclause><subclause id="idFEA2F72F3750491CB35657529561B8B4"><enum>(II)</enum><text>the date on
which such return was filed,</text>
</subclause></clause><clause id="id2E852B0CD2CB424C9CD2F19BDA6CB3BB"><enum>(ii)</enum><text>the donee
reports the sales price of the clothing or household items to the donor,
and</text>
</clause><clause id="idE59DE950B58F42C3A3499EF9A3498AD8"><enum>(iii)</enum><text>the amount
claimed as a deduction with respect to such clothing or household items does
not exceed the amount of the sales price reported to the donor.</text>
</clause></subparagraph><subparagraph id="id7B949F3CF1B348EDB63BF3C0BBCED80D"><enum>(D)</enum><header>Household
items</header><text>For purposes of this paragraph—</text>
<clause id="id0AF37A39137743E796236A410E930808"><enum>(i)</enum><header>In
general</header><text>The term <term>household items</term> includes furniture,
furnishings, electronics, appliances, linens, and other similar items.</text>
</clause><clause id="id6C6C5A673C804922A01C7E982C728E8B"><enum>(ii)</enum><header>Excluded
items</header><text>Such term does not include—</text>
<subclause id="id1006DA0D731C4F24BFFECD96DBAA4327"><enum>(I)</enum><text>food,</text>
</subclause><subclause id="id441D22B8CD6741A69EA8A15AFC78CF2D"><enum>(II)</enum><text>paintings,
antiques, and other objects of art,</text>
</subclause><subclause id="idA716F42CDD8149E9B69C35740523702D"><enum>(III)</enum><text>jewelry and
gems, and</text>
</subclause><subclause id="id897A09E433A44C999B71DB1F2F28C038"><enum>(IV)</enum><text>collections.</text>
</subclause></clause></subparagraph><subparagraph id="idF9E350FF8E364E8FB27CB179EE289DA0"><enum>(E)</enum><header>Special rule
for pass-thru entities</header><text>In the case of a partnership or S
corporation, this paragraph shall be applied at the entity level, except that
the deduction shall be denied at the partner or shareholder
level.</text>
</subparagraph></paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="id8FD8A6E8DFF4444C9FBFA97E86604955"><enum>(b)</enum><header>Substantiation</header>
<paragraph id="id82EDAEC7DCB34CBBB506E67A28A26D14"><enum>(1)</enum><header>Items of $100
or more</header><text>Subparagraph (B) of section 170(f)(8) is amended by
inserting after clause (iii) the following new clause:</text>
<quoted-block display-inline="no-display-inline" id="idA31AC39138DC494C82305DA40ACFB5F5" style="OLC">
<clause id="id774CB05F45D9493C8AD70FECD1865302"><enum>(iv)</enum><text>In the case of a
contribution consisting of clothing or household items, the number of items
contributed, an indication of the condition of each item, a description of the
type of item contributed, and a copy of the list published under paragraph
(15)(B) or an instruction on how to obtain such
list.</text>
</clause><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph><paragraph id="id80BA156C9F0046EBB148E74A9D71644C"><enum>(2)</enum><header>Items of $500
or more</header><text>Subparagraph (B) of section 170(f)(11) is amended by
inserting <quote>, the information contained in the acknowledgment required
under paragraph (8) in the case of any contribution of clothing or household
items,</quote> after <quote>a description of such property</quote>.</text>
</paragraph></subsection><subsection id="id20CF42DAD8794A12B3C0E73B1FFD4234"><enum>(c)</enum><header>Effective
date</header><text>The amendments made by this section shall apply to
contributions made after December 31, 2006.</text>
</subsection></section><section commented="no" display-inline="no-display-inline" id="id2815C4B0CB154830903DC481D2C928EF"><enum>318.</enum><header>Modification
of substantiation and recordkeeping requirements for certain charitable
contributions</header>
<subsection commented="no" display-inline="no-display-inline" id="id2B757366302D455C9B241B00BDF3F7F0"><enum>(a)</enum><header>Modification of
substantiation limitation</header><text>Subparagraph (A) of section 170(f)(8)
is amended by striking <quote>$250</quote> and inserting
<quote>$100</quote>.</text>
</subsection><subsection commented="no" display-inline="no-display-inline" id="id2469A353E5CE4EB9AC86B9E0AABE73CE"><enum>(b)</enum><header>Recordkeeping
requirement</header><text>Subsection (f) of section 170, as amended by section
417 of this Act, is amended by adding at the end the following new
paragraph:</text>
<quoted-block display-inline="no-display-inline" id="id948C0D0AE6A946B6A38C4F887AD152FA" style="OLC">
<paragraph commented="no" display-inline="no-display-inline" id="id87FCD6F777034B0F9F89F6C9257688AC"><enum>(16)</enum><header>Recordkeeping</header><text>No
deduction shall be allowed under subsection (a) for any contribution of a cash,
check, or other monetary gift unless the donor maintains as a record of such
contribution—</text>
<subparagraph commented="no" display-inline="no-display-inline" id="id575AC27C71084C0CAB1C37667C6B2128"><enum>(A)</enum><text>a cancelled
check, or</text>
</subparagraph><subparagraph commented="no" display-inline="no-display-inline" id="idCCDEB79956634D58A8271996D2AD3D2B"><enum>(B)</enum><text>a receipt or a
letter or other written communication from the donee showing the name of the
donee organization, the date of the contribution, and the amount of the
contribution.</text>
</subparagraph></paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection commented="no" display-inline="no-display-inline" id="idB625263B65274BF6B53E6B53F7308C66"><enum>(c)</enum><header>Effective
date</header><text>The amendments made by this section shall apply to
contributions made in taxable years beginning after the date of the enactment
of this Act.</text>
</subsection></section><section id="id09B71C4BECA34B378F6A6DF7EBAD51D6"><enum>319.</enum><header>Contributions
of fractional interests in tangible personal property</header>
<subsection id="id4BDC14395C44450998F2F144452D176F"><enum>(a)</enum><header>Income
tax</header><text>Section 170 (relating to charitable, etc., contributions and
gifts), as amended by section 301 of this Act, is amended by redesignating
subsection (p) as subsection (q) and by inserting after subsection (o) the
following new subsection:</text>
<quoted-block display-inline="no-display-inline" id="idAFECB7B9A6B8484E9FDEEE67799770BB" style="OLC">
<subsection id="idD0D2BB7CE60B49DDA212F70EAEB54D41"><enum>(q)</enum><header>Special rules
for fractional gifts</header>
<paragraph id="id689EE7F815FA4D11B4270890D20C7323"><enum>(1)</enum><header>Valuation of
subsequent gifts</header>
<subparagraph id="idBF5CD7441C7B48D7B7E8582235814B68"><enum>(A)</enum><header>In
general</header><text>In the case of any additional contribution, the fair
market value of such contribution shall be determined by using the lesser
of—</text>
<clause id="id377FD7EF52AF431C985D77301FF2D4C9"><enum>(i)</enum><text>the fair market
value of the property at the time of the initial fractional contribution,
or</text>
</clause><clause id="idF1749ABC19CF4BDE813CCF03AC60CE7C"><enum>(ii)</enum><text>the fair market
value of the property at the time of the additional contribution.</text>
</clause></subparagraph><subparagraph id="idA0907D33861447ED8508001BB9EF4C36"><enum>(B)</enum><header>Definitions</header><text>For
purposes of this paragraph—</text>
<clause id="id8258CA1B12B341D4A6CDD8338E9CE24D"><enum>(i)</enum><header>Additional
contribution</header><text>The term <term>additional contribution</term> means
any charitable contribution by the taxpayer of any interest in property with
respect to which the taxpayer has previously made an initial fractional
contribution.</text>
</clause><clause id="idCA7DD6310078472D8D52D0044FC99933"><enum>(ii)</enum><header>Initial
fractional contribution</header><text>The term <term>initial fractional
contribution</term> means, with respect to any taxpayer, the first charitable
contribution of an undivided portion of the taxpayer's entire interest in any
tangible personal property.</text>
</clause></subparagraph></paragraph><paragraph id="idE0C9E3430C6D4BAD8D6BC84AEF4E06EC"><enum>(2)</enum><header>Recapture of
deduction in certain cases</header>
<subparagraph id="id4CFAC016E05D477288B976116BC3478C"><enum>(A)</enum><header>In
general</header><text>The Secretary shall provide for the recapture of an
amount equal to the amount of any deduction allowed under this section (plus
interest) with respect to any contribution of an undivided interest of a
taxpayer's entire interest in property in any case where such property is not
in the physical possession of the donee during any applicable period for a
period of time which bears substantially the same ratio to 1 year as—</text>
<clause id="idFEFFC06625794A809817125749EBC2B8"><enum>(i)</enum><text>the percentage of
the undivided interest of the donee in the property (determined on the day
after such contribution was made), bears to</text>
</clause><clause id="id3EEF155EB7DD4027A5BC9D24F61B07DB"><enum>(ii)</enum><text>100
percent.</text>
</clause></subparagraph><subparagraph id="id74C86E8997C348D18427B01C024C3304"><enum>(B)</enum><header>Applicable
period</header><text>For purposes of subparagraph (A), the term
<term>applicable period</term> means any 1-year period which begins on—</text>
<clause id="idD9481EC166FE464398B212DE380EC835"><enum>(i)</enum><text>in the year of
the contribution, the date of the contribution, and</text>
</clause><clause id="idD7EDFC0EF53C42A2AC7AE76857BBBA26"><enum>(ii)</enum><text>in any
subsequent calendar year, the date which corresponds to the date described in
clause (i).</text>
</clause></subparagraph><subparagraph id="idBB88A79397CD4753A3CF6828E3EAC7FF"><enum>(C)</enum><header>Anti-abuse
rules</header><text>The Secretary shall prescribe such regulations as necessary
to prevent the avoidance of the purposes of this paragraph through the transfer
of any such undivided interest to a third party controlled by the
taxpayer.</text>
</subparagraph></paragraph></subsection><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="id6B47CBF41E7243C9A81492AB66B71961"><enum>(b)</enum><header>Estate
tax</header><text>Section 2055 (relating to transfers for public, charitable,
and religious uses) is amended by redesignating subsection (g) as subsection
(h) and by inserting after subsection (f) the following new subsection:</text>
<quoted-block display-inline="no-display-inline" id="id0098498DB58E4593A113F9A63FD006DB" style="OLC">
<subsection id="id3CA5FF4AAC7340489227F128360231EE"><enum>(g)</enum><header>Valuation of
subsequent gifts</header>
<paragraph id="id98887A2D1788454C9443499D279FC8C1"><enum>(1)</enum><header>In
general</header><text>In the case of any additional contribution, the fair
market value of such contribution shall be determined by using the lesser
of—</text>
<subparagraph id="id3212160980BC476EA500A31940E76DB7"><enum>(A)</enum><text>the fair market
value of the property at the time of the initial fractional contribution,
or</text>
</subparagraph><subparagraph id="id17F9AF9D083B4C2DAA672FE1E5A7EC1A"><enum>(B)</enum><text>the fair market
value of the property at the time of the additional contribution.</text>
</subparagraph></paragraph><paragraph id="idD89890FD7F9E4336874D86477E46077B"><enum>(2)</enum><header>Definitions</header><text>For
purposes of this paragraph—</text>
<subparagraph id="id3A3F5569702D4583A115197B1B713415"><enum>(A)</enum><header>Additional
contribution</header><text>The term <term>additional contribution</term> means
a bequest, legacy, devise, or transfer described in subsection (a) of any
interest in a property with respect to which the decedent had previously made
an initial fractional contribution.</text>
</subparagraph><subparagraph id="idE9C109E6676746A99B53B7463D88ACDA"><enum>(B)</enum><header>Initial
fractional contribution</header><text>The term <term>initial fractional
contribution</term> means, with respect to any decedent, any charitable
contribution of an undivided portion of the decedent's entire interest in any
tangible personal property for which a deduction was allowed under section
170.</text>
</subparagraph></paragraph></subsection><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="idD6656D00F63B48229C9571DD346B25FD"><enum>(c)</enum><header>Gift
tax</header><text>Section 2522 (relating to charitable and similar gifts) is
amended by redesignating subsection (e) as subsection (f) and by inserting
after subsection (d) the following new subsection:</text>
<quoted-block display-inline="no-display-inline" id="idF41F52A434144C7C8575B7FF597D3998" style="OLC">
<subsection id="idDD27166DF6D542AF9536607EECBBC726"><enum>(e)</enum><header>Special rules
for fractional gifts</header>
<paragraph id="idC820C1274AF24C77967B0DB6C6E8AD5F"><enum>(1)</enum><header>Valuation of
subsequent gifts</header>
<subparagraph id="id0A6CA4A36F53419C8295F3190CAB2108"><enum>(A)</enum><header>In
general</header><text>In the case of any additional contribution, the fair
market value of such contribution shall be determined by using the lesser
of—</text>
<clause id="id5A51037EDF294BAB86C44B287959025F"><enum>(i)</enum><text>the fair market
value of the property at the time of the initial fractional contribution,
or</text>
</clause><clause id="id0182088E61D74E5CB56AE27B49FE501E"><enum>(ii)</enum><text>the fair market
value of the property at the time of the additional contribution.</text>
</clause></subparagraph><subparagraph id="id46921E1410114F3DB37CA77B8BD3D7C5"><enum>(B)</enum><header>Definitions</header><text>For
purposes of this paragraph—</text>
<clause id="id22FE72A20E1B44F99A7FBA1D21DF706E"><enum>(i)</enum><header>Additional
contribution</header><text>The term <term>additional contribution</term> means
any gift for which a deduction is allowed under subsection (a) or (b) of any
interest in a property with respect to which the donor has previously made an
initial fractional contribution.</text>
</clause><clause id="id34E7B7A63B974A74AF9724262C283B79"><enum>(ii)</enum><header>Initial
fractional contribution</header><text>The term <term>initial fractional
contribution</term> means, with respect to any donor, the first gift of an
undivided portion of the donor's entire interest in any tangible personal
property for which a deduction is allowed under subsection (a) or (b).</text>
</clause></subparagraph></paragraph><paragraph id="idF923D69823284577A7269C6B7628FC46"><enum>(2)</enum><header>Recapture of
deduction in certain cases</header>
<subparagraph id="idDEE47535892C4ED0AD4CEDD0ED741CD2"><enum>(A)</enum><header>In
general</header><text>The Secretary shall provide for the recapture of an
amount equal to the amount of any deduction allowed under this section (plus
interest) with respect to any contribution of an undivided interest of a
donor's entire interest in property in any case where such property is not in
the physical possession of the donee during any applicable period for a period
of time which bears substantially the same ratio to 1 year as—</text>
<clause id="id43AEA893AC7641B0A34182ACA5433333"><enum>(i)</enum><text>the percentage of
the undivided interest of the donee in the property (determined on the day
after such contribution was made), bears to</text>
</clause><clause id="id237951D49D5E4C50872EC2382273CE40"><enum>(ii)</enum><text>100
percent.</text>
</clause></subparagraph><subparagraph id="id929390C2E78844FCBDDF93F0480FDDE2"><enum>(B)</enum><header>Applicable
period</header><text>For purposes of subparagraph (A), the term
<term>applicable period</term> means any 1-year period which begins on—</text>
<clause id="id348F429D898D4EC7B56A3381C18705AB"><enum>(i)</enum><text>in the year of
the contribution, the date of the contribution, and</text>
</clause><clause id="idFB348B02652D4CF9B6630B5C17365B11"><enum>(ii)</enum><text>in any
subsequent calendar year, the date which corresponds to the date described in
clause (i).</text>
</clause></subparagraph><subparagraph id="idBCDEA3C1FDC045598A2F4D633B1382CA"><enum>(C)</enum><header>Anti-abuse
rules</header><text>The Secretary shall prescribe such regulations as necessary
to prevent the avoidance of the purposes of this paragraph though the transfer
of any such undivided interest to a third party controlled by the
donor.</text>
</subparagraph></paragraph></subsection><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection commented="no" display-inline="no-display-inline" id="idAB50E04AFE4B416D96A21B3276B63C87"><enum>(d)</enum><header>Effective
date</header><text>The amendments made by this section shall apply to
contributions, bequests, and gifts made after the date of the enactment of this
Act.</text>
</subsection></section><section id="id3249936ABB234998A594B4C8FD822A75"><enum>320.</enum><header>Provisions
relating to substantial and gross overstatements of valuations of charitable
deduction property</header>
<subsection id="id013B888500C84ED383C3B11766A5DADF"><enum>(a)</enum><header>Substantial and
gross overstatements of valuations of charitable deduction property</header>
<paragraph id="id894095AC73B2496A95E1BEBE409E1C31"><enum>(1)</enum><header>In
general</header><text>Section 6662 (relating to imposition of accuracy-related
penalties) is amended by adding at the end the following new subsection:</text>
<quoted-block display-inline="no-display-inline" id="idB1CA17B471124CE6BE0456B7A61BD202" style="OLC">
<subsection id="id526A4A1FBA504D8289AA49173A1D7342"><enum>(i)</enum><header>Special rules
for charitable deduction property</header><text>In the case of charitable
deduction property (as defined in section 6664(c)(3)(A))—</text>
<paragraph id="idF63AB4E93D5145028C065D9C7024386E"><enum>(1)</enum><text>the determination
under subsection (e)(1)(A) as to whether there is a substantial valuation
misstatement under chapter 1 with respect to the value of the property shall be
made by substituting <quote>150 percent</quote> for <quote>200 percent</quote>,
and</text>
</paragraph><paragraph id="idB2EC9F4EFED046DAB29362B1F498CEBF"><enum>(2)</enum><text>the determination
under subsection (h)(2)(A)(i) as to whether there is a gross valuation
misstatement with respect to the value of the property shall be made by
substituting <quote>200 percent</quote> for <quote>400 percent</quote> and by
substituting <quote>150 percent</quote> for <quote>200 percent</quote> in
applying subsection (e)(1)(A) for purposes of such
determination.</text>
</paragraph></subsection><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph><paragraph id="id7645EE10CAD34153A275B0534B764A41"><enum>(2)</enum><header>Elimination of
reasonable cause exception for gross misstatements</header><text>Section
6664(c)(2) (relating to reasonable cause exception for underpayments) is
amended by striking <quote>paragraph (1) shall not apply unless</quote> and
inserting <quote>paragraph (1) shall not apply. The preceding sentence shall
not apply to a substantial valuation overstatement under chapter 1
if</quote>.</text>
</paragraph></subsection><subsection id="idF148E5A4931C4822B72EF4C1151960C0"><enum>(b)</enum><header>Penalty on
appraisers whose appraisals result in substantial or gross valuation
misstatements</header>
<paragraph id="idE766440CCDC4489AAAFF845154675ECF"><enum>(1)</enum><header>In
general</header><text>Part I of subchapter B of chapter 68 (relating to
assessable penalties) is amended by inserting after section 6695 the following
new section:</text>
<quoted-block display-inline="no-display-inline" id="idBB4862F5611B4FE98661F8C6C9C6EFD8" style="OLC">
<section id="idE3D17BD152AE4C668CD436322B57E546"><enum>6695A.</enum><header>Substantial
and gross valuation misstatements attributable to incorrect appraisals</header>
<subsection id="id509A9FC464844DD6BDAF4439351AEC70"><enum>(a)</enum><header>Imposition of
penalty</header><text>If—</text>
<paragraph id="idFAE684BC3AE447089BF40EFCE55D056F"><enum>(1)</enum><text>a person prepares
an appraisal of the value of property and such person knows, or reasonably
should have known, that the appraisal would be used in connection with a return
or a claim for refund, and</text>
</paragraph><paragraph id="id8F21BC2C7477403A810688654F12C929"><enum>(2)</enum><text>the claimed value
of the property on a return or claim for refund which is based on such
appraisal results in a substantial valuation misstatement under chapter 1
(within the meaning of section 6662(e)), or a gross valuation misstatement
(within the meaning of section 6662(h)), with respect to such property,</text>
</paragraph><continuation-text continuation-text-level="subsection">then such
person shall pay a penalty in the amount determined under subsection
(b).</continuation-text></subsection><subsection id="idC5EEAF278D5843128DA6A6B2D9B61A90"><enum>(b)</enum><header>Amount of
penalty</header><text>The amount of the penalty imposed under subsection (a) on
any person with respect to an appraisal shall be equal to the lesser of—</text>
<paragraph id="idB1B7237BC81D4942AD36C9D4B34CCCD9"><enum>(1)</enum><text>the greater
of—</text>
<subparagraph id="idC66F35F182B4482DB6A00C2478AD2EE2"><enum>(A)</enum><text>10 percent of the
amount of the underpayment (as defined in section 6664(a)) attributable to the
misstatement described in subsection (a)(2), or</text>
</subparagraph><subparagraph id="id544EBB1092FC4953A30177433689EAF5"><enum>(B)</enum><text>$1,000, or</text>
</subparagraph></paragraph><paragraph id="id2D1739FD07AE485CB71F86C322025418"><enum>(2)</enum><text>125 percent of
the gross income received by the person described in subsection (a)(1) from the
preparation of the appraisal.</text>
</paragraph></subsection><subsection id="id0C67EE5A30B449B1917F195DEF569109"><enum>(c)</enum><header>Exception</header><text>No
penalty shall be imposed under subsection (a) if the person establishes to the
satisfaction of the Secretary that the value established in the appraisal was
more likely than not the proper
value.</text>
</subsection></section><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph><paragraph id="id60AC0F3FA9A443F69150CD88B4CF56CB"><enum>(2)</enum><header>Rules
applicable to penalty</header><text>Section 6696 (relating to rules applicable
with respect to sections 6694 and 6695) is amended—</text>
<subparagraph id="idD89312CB1C034562983D7159FA5448BA"><enum>(A)</enum><text>by striking
<quote>6694 and 6695</quote> each place it appears in the text and heading and
inserting <quote>6694, 6695, and 6695A</quote>, and</text>
</subparagraph><subparagraph id="id6DE8A374A0DA4F97A4818B92F4956798"><enum>(B)</enum><text>by striking
<quote>6694 or 6695</quote> each place it appears in the text and inserting
<quote>6694, 6695, or 6695A</quote>.</text>
</subparagraph></paragraph><paragraph id="idFA66225EAF824C38ABAA9C8AE6304EB3"><enum>(3)</enum><header>Conforming
amendment</header><text>The table of sections for part I of subchapter B of
chapter 68 is amended by striking the item relating to section 6696 and
inserting the following new items:</text>
<quoted-block display-inline="no-display-inline" id="id4F4038CF4E79410C9D8A7AD7F531B4A2" style="OLC">
<toc>
<toc-entry level="section">Sec. 6695A.. Substantial and gross
valuation misstatements attributable to incorrect appraisals.</toc-entry>
<toc-entry level="section">Sec. 6696. Rules applicable with respect
to sections 6694, 6695, and
6695A.</toc-entry>
</toc>
<after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph></subsection><subsection id="idD16F9022E44E42B3B7856D2E73353415"><enum>(c)</enum><header>Qualified
appraisers and appraisals</header>
<paragraph id="idB344D3BF3C044496B24F9FB839A9D6A8"><enum>(1)</enum><header>In
general</header><text>Subparagraph (E) of section 170(f)(11) is amended to read
as follows:</text>
<quoted-block display-inline="no-display-inline" id="idC1CA609E25144E8E9A97335AABF8FCBF" style="OLC">
<subparagraph id="idAB57786DCA904720BF2C2F6389821CD1"><enum>(E)</enum><header>Qualified
appraisal and appraiser</header><text>For purposes of this paragraph—</text>
<clause id="id83C1854A33D94B6DB99A696645477CBC"><enum>(i)</enum><header>Qualified
appraisal</header><text>The term <term>qualified appraisal</term> means, with
respect to any property, an appraisal of such property which—</text>
<subclause id="id3FC83AD2C7724E12876EAA648E575C52"><enum>(I)</enum><text>is treated for
purposes of this paragraph as a qualified appraisal under regulations or other
guidance prescribed by the Secretary, and</text>
</subclause><subclause id="idFE7FB7942A2A4AE4AC220457EEBD2572"><enum>(II)</enum><text>is conducted by
a qualified appraiser in accordance with generally accepted appraisal standards
and any regulations or other guidance prescribed under subclause (I).</text>
</subclause></clause><clause id="idA2449CE4E6834FBFA51A8031D042899C"><enum>(ii)</enum><header>Qualified
appraiser</header><text>Except as provided in clause (iii), the term
<term>qualified appraiser</term> means an individual who—</text>
<subclause id="id6EAAF459F9B443C7BE733245DA770D84"><enum>(I)</enum><text>has earned an
appraisal designation from a recognized professional appraiser organization or
has otherwise met minimum education and experience requirements set forth in
regulations prescribed by the Secretary,</text>
</subclause><subclause id="id1A46980459BE4DE59381766AAE6E0E9A"><enum>(II)</enum><text>regularly
performs appraisals for which the individual receives compensation, and</text>
</subclause><subclause id="id86A41F417A864B37B3A6CB8905DC7FB9"><enum>(III)</enum><text>meets such
other requirements as may be prescribed by the Secretary in regulations or
other guidance.</text>
</subclause></clause><clause id="idD9939ED374694D9184A0308330B2F0F5"><enum>(iii)</enum><header>Specific
appraisals</header><text>An individual shall not be treated as a qualified
appraiser with respect to any specific appraisal unless—</text>
<subclause id="id155D2BB29FD944419DE873E10E8B2CC3"><enum>(I)</enum><text>the individual
demonstrates verifiable education and experience in valuing the type of
property subject to the appraisal, and</text>
</subclause><subclause id="idE108CE6BC63E44858C2B1B680C4124FE"><enum>(II)</enum><text>the individual
has not been prohibited from practicing before the Internal Revenue Service by
the Secretary under section 330(c) of title 31, United States Code, at any time
during the 3-year period ending on the date of the
appraisal.</text>
</subclause></clause></subparagraph><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph><paragraph id="id58617FD01B6A40CD93AECBCB328FCCFA"><enum>(2)</enum><header>Reasonable
cause exception</header><text>Subparagraphs (B) and (C) of section 6664(c)(3)
are amended to read as follows:</text>
<quoted-block display-inline="no-display-inline" id="id0BB70A95336C44ABBC0FE27678A2FCF7" style="OLC">
<subparagraph id="id7B74BDD590484E27ABCCDF1B65D4FF56"><enum>(B)</enum><header>Qualified
appraisal</header><text>The term <term>qualified appraisal</term> has the
meaning given such term by section 170(f)(11)(E)(i).</text>
</subparagraph><subparagraph id="id4656807083BE4C3E974A86258E5BF6CB"><enum>(C)</enum><header>Qualified
appraiser</header><text>The term <term>qualified appraiser</term> has the
meaning given such term by section
170(f)(11)(E)(ii).</text>
</subparagraph><after-quoted-block>.
</after-quoted-block></quoted-block>
</paragraph></subsection><subsection id="id99866C68834C46D0A7079B28153FDEAD"><enum>(d)</enum><header>Disciplinary
actions against appraisers</header><text>Section 330(c) of title 31, United
States Code, is amended by striking <quote>with respect to whom a penalty has
been assessed under section 6701(a) of the Internal Revenue Code of
1986</quote>.</text>
</subsection><subsection id="id41E87904B5C346C2B08EFBE16D0F519D"><enum>(e)</enum><header>Effective
dates</header>
<paragraph id="id5CDC16B4A18745E9A2F1C0DA90FD4031"><enum>(1)</enum><header>Misstatement
penalties</header><text>Except as provided in paragraph (3), the amendments
made by subsection (a) shall apply to returns filed after the date of the
enactment of this Act.</text>
</paragraph><paragraph id="id442706A592D54FEAA5892C76BFCE4CEC"><enum>(2)</enum><header>Appraiser
provisions</header><text>Except as provided in paragraph (3), the amendments
made by subsections (b), (c), and (d) shall apply to appraisals prepared with
respect to returns or submissions filed after the date of the enactment of this
Act.</text>
</paragraph><paragraph id="idFC31BC61440F41C5A45B17956DF79722"><enum>(3)</enum><header>Special rule
for certain easements</header><text>In the case of a contribution of a
qualified real property interest which is a restriction with respect to the
exterior of a building described in section 170(h)(4)(C)(ii) of the Internal
Revenue Code of 1986, and an appraisal with respect to the contribution, the
amendments made by subsections (a) and (b) shall apply to returns filed after
December 16, 2004.</text>
</paragraph></subsection></section><section commented="no" display-inline="no-display-inline" id="id14D24198406948149A5531BFABF909C4"><enum>321.</enum><header>Additional
standards for credit counseling organizations</header>
<subsection display-inline="no-display-inline" id="idAC51E5705324465FA716CD2856563A04"><enum>(a)</enum><header>In
general</header><text>Section 501 (relating to exemption from tax on
corporations, certain trusts, etc.) is amended by redesignating subsection (q)
as subsection (r) and by inserting after subsection (p) the following new
subsection:</text>
<quoted-block display-inline="no-display-inline" id="id0F2F09A6D4CA44F59313203BCAC5C161" style="OLC">
<subsection display-inline="no-display-inline" id="idD8BD9490DEB1439FA6B81A8153DB9A8F"><enum>(q)</enum><header>Special rules
for credit counseling organizations</header>
<paragraph display-inline="no-display-inline" id="id69AF3177A28141F1B84984DDBDCE609B"><enum>(1)</enum><header>In
general</header><text>An organization with respect to which the provision of
credit counseling services is a substantial purpose shall not be exempt from
tax under subsection (a) unless such organization is described in paragraph (3)
or (4) of subsection (c) and such organization is organized and operated in
accordance with the following requirements:</text>
<subparagraph display-inline="no-display-inline" id="id11B6D19FAD2B492A9F3E0601C9F76AF6"><enum>(A)</enum><text>The
organization—</text>
<clause display-inline="no-display-inline" id="idF3ED89229FB842C6975E51449B1C83B5"><enum>(i)</enum><text>provides credit
counseling services tailored to the specific needs and circumstances of
consumers,</text>
</clause><clause display-inline="no-display-inline" id="id720EC5B4C1AF4134B5B222887E29DAE6"><enum>(ii)</enum><text>makes no loans
to debtors and does not negotiate the making of loans on behalf of debtors,
and</text>
</clause><clause display-inline="no-display-inline" id="id9181CA58C36C4DBC98BA24BB894E9EAD"><enum>(iii)</enum><text>does not
promote, or charge any separate fee for, any service for the purpose of
improving any consumer's credit record, credit history, or credit
rating.</text>
</clause></subparagraph><subparagraph display-inline="no-display-inline" id="id8ABB2DA5DD6E47AAAAC6A3B0C2C4B864"><enum>(B)</enum><text>The organization
does not refuse to provide credit counseling services to a consumer due to the
inability of the consumer to pay, the ineligibility of the consumer for debt
management plan enrollment, or the unwillingness of the consumer to enroll in a
debt management plan.</text>
</subparagraph><subparagraph display-inline="no-display-inline" id="idD8FE74989FA74C3C823684E4E26D930A"><enum>(C)</enum><text>The organization
establishes and implements a fee policy which—</text>
<clause display-inline="no-display-inline" id="id669FDE49207342AFABA06254E5D7F69C"><enum>(i)</enum><text>requires that any
fees charged to a consumer for services are reasonable, and</text>
</clause><clause display-inline="no-display-inline" id="id3632598DD4C74711BEB407B0EDB76E60"><enum>(ii)</enum><text>prohibits
charging any fee based in whole or in part on a percentage of the consumer’s
debt, the consumer’s payments to be made pursuant to a debt management plan, or
the projected or actual savings to the consumer resulting from enrolling in a
debt management plan.</text>
</clause></subparagraph><subparagraph display-inline="no-display-inline" id="idB231F963B0A446E2A53DDB95A1B80CF9"><enum>(D)</enum><text>At all times the
organization has a board of directors or other governing body—</text>
<clause display-inline="no-display-inline" id="id3017ECCB92CD461EBB50F049CAC1CE17"><enum>(i)</enum><text>which is
controlled by persons who represent the broad interests of the public, such as
public officials acting in their capacities as such, persons having special
knowledge or expertise in credit or financial education, and community
leaders,</text>
</clause><clause display-inline="no-display-inline" id="id1005947D758F44F195F2D3ACE7B4A05F"><enum>(ii)</enum><text>not more than 20
percent of the voting power of which is vested in persons who are employed by
the organization or who will benefit financially, directly or indirectly, from
the organization’s activities (other than through the receipt of reasonable
directors' fees or the repayment of consumer debt to creditors other than the
credit counseling organization or its affiliates), and</text>
</clause><clause display-inline="no-display-inline" id="idAA56AC47B3A24358A1693614BF9CFC0A"><enum>(iii)</enum><text>not more than
49 percent of the voting power of which is vested in persons who are employed
by the organization or who will benefit financially, directly or indirectly,
from the organization’s activities (other than through the receipt of
reasonable directors' fees).</text>
</clause></subparagraph><subparagraph commented="no" display-inline="no-display-inline" id="id98E15689563447C6B97EB9E31504A1E4"><enum>(E)</enum><text>The organization
does not own more than 35 percent of—</text>
<clause commented="no" display-inline="no-display-inline" id="id6F7AB2FAB7644426968789344B3B4426"><enum>(i)</enum><text>the total
combined voting power of a corporation which is in the business of lending
money, repairing credit, or providing debt management plan services, payment
processing, or similar services,</text>
</clause><clause commented="no" display-inline="no-display-inline" id="id2D8F9FE8710540029E384395C76197CF"><enum>(ii)</enum><text>the profits
interest of a partnership which is in the business of lending money, repairing
credit, or providing debt management plan services, payment processing, or
similar services, and</text>
</clause><clause commented="no" display-inline="no-display-inline" id="id68C2D790529B418FA64F25EC028A3271"><enum>(iii)</enum><text>the beneficial
interest of a trust or estate which is in the business of lending money,
repairing credit, or providing debt management plan services, payment
processing, or similar services.</text>
</clause></subparagraph><subparagraph display-inline="no-display-inline" id="id6388A2FBE9CE4C15884646F29B3436CD"><enum>(F)</enum><text>The organization
receives no amount for providing referrals to others for financial services
(including debt management services) or credit counseling services to be
provided to consumers, and pays no amount to others for obtaining referrals of
consumers.</text>
</subparagraph></paragraph><paragraph display-inline="no-display-inline" id="id1FDA386B8B424443AF29BADA53A37B42"><enum>(2)</enum><header>Requirements
under subsection <enum-in-header>(c)(3)</enum-in-header></header><text>In
addition to the requirements under paragraph (1), an organization with respect
to which the provision of credit counseling services is a substantial purpose
and which is described in paragraph (3) of subsection (c) shall not be exempt
from tax under subsection (a) unless such organization is organized and
operated in accordance with the following requirements:</text>
<subparagraph display-inline="no-display-inline" id="idA331811080244FDBAC70168C746FD0D7"><enum>(A)</enum><text>The
organization—</text>
<clause display-inline="no-display-inline" id="idAC5AF4AE08D6487FAD2D860A0CA46524"><enum>(i)</enum><text>charges no fees
(other than nominal fees) for debt management plan services or credit
counseling services and waives any fees if the consumer is unable to pay such
fees, and</text>
</clause><clause display-inline="no-display-inline" id="idA90AA94612BF4B62AA5FD03DB0FBAD1C"><enum>(ii)</enum><text>does not solicit
contributions from consumers during the initial counseling process or while the
consumer is receiving services from the organization.</text>
</clause></subparagraph><subparagraph display-inline="no-display-inline" id="idC811B7927B2C4CF9AF6B945B0B73DEB1"><enum>(B)</enum><text>The activities of
the organization related to debt management plan services (in the aggregate) do
not exceed 25 percent of the total activities of the organization activities
measured by any of the following:</text>
<clause display-inline="no-display-inline" id="id63586D84CC00450B993B796BCE67175A"><enum>(i)</enum><text>The time spent on
activities.</text>
</clause><clause display-inline="no-display-inline" id="idF12861CCA2E1450582544E51F551E802"><enum>(ii)</enum><text>The resources
dedicated to activities.</text>
</clause><clause display-inline="no-display-inline" id="idA4B12E8310D44C3DADB471724083C13D"><enum>(iii)</enum><text>The effort
expended by the organization with respect to activities.</text>
</clause><clause display-inline="no-display-inline" id="idC3268850493D401CAC344463C21187B1"><enum>(iv)</enum><text>The sources of
revenue of the organization.</text>
</clause><clause display-inline="no-display-inline" id="idD8F43329F2714F9A83B1428FAF7A112F"><enum>(v)</enum><text>Any other
measures prescribed by the Secretary.</text>
</clause></subparagraph></paragraph><paragraph display-inline="no-display-inline" id="id9C726F0FB71640B58B6409D26DBBA1B7"><enum>(3)</enum><header>Requirements
under subsection <enum-in-header>(c)(4)</enum-in-header></header><text>In
addition to the requirements under paragraph (1), an organization with respect
to which the provision of credit counseling services is a substantial purpose
and which is described in paragraph (4) of subsection (c) shall not be exempt
from tax under subsection (a) unless such organization—</text>
<subparagraph display-inline="no-display-inline" id="id6C8BC695398B4BA4BE8FFB306D9F39D5"><enum>(A)</enum><text>is organized and
operated such that it charges no fees (other than nominal fees) for credit
counseling services and waives any fees if the consumer is unable to pay such
fees, and</text>
</subparagraph><subparagraph display-inline="no-display-inline" id="idE360C33B6B62498AB4218888291E6A36"><enum>(B)</enum><text>notifies the
Secretary, in such manner as the Secretary may by regulations prescribe, that
it is applying for recognition as a credit counseling organization.</text>
</subparagraph></paragraph><paragraph display-inline="no-display-inline" id="id6A41EBE98C78497180C1BE5175683866"><enum>(4)</enum><header>Secretarial
authority</header><text>The Secretary may require any organization described in
paragraph (1) to submit such information as the Secretary requires to verify
that such organization meets the requirements of this section.</text>
</paragraph><paragraph display-inline="no-display-inline" id="idB801EC2B97DF4C60A35049DD9F951072"><enum>(5)</enum><header>Credit
counseling services; Debt management plan services</header><text>For purposes
of this subsection—</text>
<subparagraph display-inline="no-display-inline" id="id9E911AEADE3843A4889757F36D2D2F93"><enum>(A)</enum><header>Credit
counseling services</header><text>The term <term>credit counseling
services</term> means—</text>
<clause display-inline="no-display-inline" id="id2518346FD2C849A48577D5F16D08F741"><enum>(i)</enum><text>the providing of
educational information to the general public on budgeting, personal finance,
financial literacy, saving and spending practices, and the sound use of
consumer credit,</text>
</clause><clause display-inline="no-display-inline" id="id73AE8A59916E49149B5C749BD55EF6A3"><enum>(ii)</enum><text>the assisting of
individuals and families with financial problems by providing them with
counseling, or</text>
</clause><clause display-inline="no-display-inline" id="id5ED76D460047414697B420910EDF3C71"><enum>(iii)</enum><text>a combination
of the activities described in clauses (i) and (ii).</text>
</clause></subparagraph><subparagraph display-inline="no-display-inline" id="idF7F4F68C02164B909C629CFA7DA62A20"><enum>(B)</enum><header>Debt management
plan services</header><text>The term <term>debt management plan services</term>
means services related to the repayment, consolidation, or restructuring of a
consumer's debt, and includes the negotiation with creditors of lower interest
rates, the waiver or reduction of fees, and the marketing and processing of
debt management
plans.</text>
</subparagraph></paragraph></subsection><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection display-inline="no-display-inline" id="id0DEA45B9DD75445AA60678383BA5ADF0"><enum>(b)</enum><header>Debt management
plan services treated as an unrelated business</header><text>Section 513
(relating to unrelated trade or business) is amended by adding at the end the
following:</text>
<quoted-block display-inline="no-display-inline" id="id3122CBBDCDC44C30AE1CFD1208855A5B" style="OLC">
<subsection display-inline="no-display-inline" id="idAC86ADB9AA4D4237A53FA553ED69EFD5"><enum>(j)</enum><header>Debt management
plan services</header><text>The term <term>unrelated trade or business</term>
includes—</text>
<paragraph display-inline="no-display-inline" id="id0FE4F5E27C9948E2A212FE8F86BA17E5"><enum>(1)</enum><text>the provision of
debt management plan services (as defined in section 501(q)(4)(B)) by an
organization described in section 501(q) to the extent such services are not
substantially related to the provision of credit counseling services (as
defined in section 501(q)(4)(A)) to a consumer, and</text>
</paragraph><paragraph display-inline="no-display-inline" id="id4C6EF5E017644034A6658F7DC3F60FC3"><enum>(2)</enum><text>the provision of
debt management plan services (as so defined) by any organization other than an
organization which meets the requirements of section
501(q).</text>
</paragraph></subsection><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection commented="no" display-inline="no-display-inline" id="id5EF78186C9674FBEB8679C6D49A23566"><enum>(c)</enum><header>Effective
date</header>
<paragraph commented="no" display-inline="no-display-inline" id="idBF0C86443F8B4F5DA46818A8CAB74A0A"><enum>(1)</enum><header>In
general</header><text>Except as provided in paragraph (2), the amendments made
by this section shall apply to taxable years beginning after the date of the
enactment of this Act.</text>
</paragraph><paragraph commented="no" display-inline="no-display-inline" id="id5A3F1B7FD62B4F36A8C1E5DBFE2EE064"><enum>(2)</enum><header>Transition rule
for existing organizations</header><text>In the case of any organization
described in paragraph (3) or (4) section 501(c) of the Internal Revenue Code
of 1986 and with respect to which the provision of credit counseling services
is a substantial purpose on the date of the enactment of this Act, the
amendments made by this section shall apply to taxable years beginning after
the date which is 1 year after the date of the enactment of this Act.</text>
</paragraph></subsection></section></part><part id="id450F8E3CAEC74441800F7F07192CA31E"><enum>II</enum><header>Improved
accountability of donor advised funds</header>
<section id="idD90C01F3840540B8ABC37AA64C253A97"><enum>331.</enum><header>Excise tax on
sponsoring organizations of donor advised funds for failure to meet
distribution requirements</header>
<subsection id="id22340601E5144F1483E09C3732F4B32F"><enum>(a)</enum><header>In
general</header><text>Chapter 42 (relating to private foundations and certain
other tax-exempt organizations), as amended by section 311, is amended by
adding at the end the following new subchapter:</text>
<quoted-block display-inline="no-display-inline" id="id35C0B2FB00F541DCB3568C6E0EA5D419" style="OLC">
<subchapter id="id1ADD37E1EC174A20B6893F38E52A40BD"><enum>G</enum><header>Donor advised
funds</header>
<toc container-level="legis-body-container" lowest-level="section" quoted-block="no-quoted-block" regeneration="no-regeneration">
<toc-entry level="section">Sec. 4967. Taxes on sponsoring
organizations of donor advised funds for failure to meet distributions
requirements.</toc-entry>
<toc-entry bold="off" level="section">Sec. 4968. Taxes on
prohibited distributions.</toc-entry>
<toc-entry bold="off" level="section">Sec. 4969. Taxes on
prohibited benefits.</toc-entry>
</toc>
<section id="idAC3AE64116C7451E9752C36101D029EB"><enum>4967.</enum><header>Taxes on
sponsoring organizations of donor advised funds for failure to meet
distribution requirements</header>
<subsection id="idF8C03BB62167414F99F510E6B532A3D8"><enum>(a)</enum><header>Initial
tax</header><text>There is hereby imposed on any sponsoring organization a tax
equal to 30 percent of each of the following amounts:</text>
<paragraph id="idC52CD00EBC584106B675E4C87B3503C7"><enum>(1)</enum><text>The organization
level undistributed amount of such sponsoring organization (other than any
organization subject to tax under section 4942) for any taxable year which has
not been distributed before the first day of the second (or any succeeding)
taxable year following such taxable year (if such first day falls within the
taxable period).</text>
</paragraph><paragraph id="idE83CDF2A04DD4CB9B6E22D4424FF1566"><enum>(2)</enum><text>The fund level
undistributed amount of any donor advised fund of such sponsoring organization
for any taxable year which has not been distributed before the 121st day of the
first (or any succeeding) taxable year following the applicable period (if such
121st day falls within the taxable period).</text>
</paragraph><paragraph id="id2031645E33714716A36C6731D85E95F7"><enum>(3)</enum><text>The illiquid fund
undistributed amount of any illiquid asset donor advised fund of such
sponsoring organization for any taxable year which has not been distributed
before the 121st day of the second (or any succeeding) taxable year following
such taxable year (if such 121st day falls within the taxable period).</text>
</paragraph></subsection><subsection id="ID5b3180c43e034daea96186411c59b0a5"><enum>(b)</enum><header>Additional
tax</header><text>In any case in which an initial tax is imposed under
subsection (a) on any amount, if any portion of such amount remains
undistributed at the close of the taxable period, there is hereby imposed a tax
equal to 100 percent of the amount remaining undistributed at such time.</text>
</subsection><subsection id="IDb9212c517b724553bccbe4ff6af338b1"><enum>(c)</enum><header>Organization
level undistributed amount; fund level undistributed amount; illiquid fund
undistributed amount</header><text>For purposes of this section—</text>
<paragraph id="idF207601C30544606A051E2FB15E2259B"><enum>(1)</enum><header>Organization
level undistributed amount</header><text>The term <term>organization level
undistributed amount</term> means, with respect to any sponsoring organization
for any taxable year, the amount by which—</text>
<subparagraph id="ID07b2284c4e624145ab2b7a82a74c82dd"><enum>(A)</enum><text>the organization
level distributable amount for such taxable year, exceeds</text>
</subparagraph><subparagraph id="IDa3a4e0e7d9ab45a5aa0775511d539ae5"><enum>(B)</enum><text>the qualifying
distributions made during such taxable year and designated for the purpose of
reducing such amount.</text>
</subparagraph></paragraph><paragraph id="id99C1291B729F46968F479F32CDF731F0"><enum>(2)</enum><header>Fund level
undistributed amount</header><text>The term <term>fund level undistributed
amount</term> means, with respect to any donor advised fund of a sponsoring
organization for any applicable period, the amount by which—</text>
<subparagraph id="id6CA44C1B65D246D3A5963BB8DE15A7FA"><enum>(A)</enum><text>the fund level
distributable amount for such applicable period, exceeds</text>
</subparagraph><subparagraph commented="no" display-inline="no-display-inline" id="idB9476D8B0F9F49FCB54C47F7632120D7"><enum>(B)</enum><text>the qualifying
distributions made during such applicable period and designated for the purpose
of reducing such amount.</text>
</subparagraph></paragraph><paragraph id="idF98A54F34AA748FA92AC18F9F7C20D70"><enum>(3)</enum><header>Illiquid fund
undistributed amount</header>
<subparagraph id="id1E633D55F7C84CDC811CAC2F38EB48F4"><enum>(A)</enum><header>In
general</header><text>The term <term>illiquid fund undistributed amount</term>
means, with respect to any illiquid asset donor advised fund of a sponsoring
organization for any taxable year, the amount by which—</text>
<clause id="id6F7874C5312942258268481ED1D6FB6A"><enum>(i)</enum><text>the illiquid fund
distributable amount for such taxable year, exceeds</text>
</clause><clause commented="no" display-inline="no-display-inline" id="id27FA831CA84742F194737D854E54C3CA"><enum>(ii)</enum><text>the qualifying
distributions made during such taxable year and designated for the purpose of
reducing such amount.</text>
</clause></subparagraph><subparagraph commented="no" display-inline="no-display-inline" id="id07FDA5EBD8824E0183DA325CE473D8A7"><enum>(B)</enum><header>Illiquid asset
donor advised fund</header><text>The term <term>illiquid asset donor advised
fund</term> means for any taxable year a donor advised fund the value of the
illiquid assets of which (as of the end of the preceding taxable year) exceeds
10 percent of the value of the total assets of such fund.</text>
</subparagraph><subparagraph commented="no" display-inline="no-display-inline" id="idCD2A4AD9455B4059AC9C89759122CB43"><enum>(C)</enum><header>Illiquid
asset</header><text>The term <term>illiquid asset</term> means for any taxable
year any asset other than cash and marketable securities the value of which is
held for the entire taxable year as such asset or any other illiquid
asset.</text>
</subparagraph></paragraph></subsection><subsection id="id7900FF18CBD24178A99C53677FC3CCD2"><enum>(d)</enum><header>Organization
level distributable amount; fund level distributable amount; illiquid fund
distributable amount</header><text>For purposes of this section—</text>
<paragraph id="idE5A4535045EC41E0BBA0C20912388C44"><enum>(1)</enum><header>Organization
level distributable amount</header><text>The term <term>organization level
distributable amount</term> means, with respect to any sponsoring organization
for any taxable year, an amount equal to 5 percent of the fair market value of
the aggregate assets of all donor advised funds maintained by such organization
as determined on the last day of the preceding taxable year (other than such
funds which have been in existence for less than 1 year as so
determined).</text>
</paragraph><paragraph id="id50CF2C2DADDE4CC1848B8CC290C21635"><enum>(2)</enum><header>Fund level
distributable amount</header><text>The term <term>fund level distributable
amount</term> means, with respect to any donor advised fund of any sponsoring
organization for any applicable 3-consecutive taxable year period, an amount
equal to the greater of—</text>
<subparagraph id="id689EC59625014D38B6554396BA54CD0B"><enum>(A)</enum><text>$250, or</text>
</subparagraph><subparagraph id="id7361EEB6779C4D42B196795091CA48C9"><enum>(B)</enum><text>2.5 percent of
the greater of—</text>
<clause id="idC70DA6A9DEF44555BE1E0001ADB54492"><enum>(i)</enum><text>the average of
the sponsoring organization's required minimum initial contribution amount for
such period, or</text>
</clause><clause id="idD646221DB53C437598E2B08F5C1D0CE0"><enum>(ii)</enum><text>the average of
the sponsoring organization's required minimum balance for such period,</text>
</clause><continuation-text continuation-text-level="subparagraph">for the
type of donor with respect to such donor advised fund.</continuation-text></subparagraph></paragraph><paragraph id="id0B846BEE644A45F6A2D9A3DA0B9CDC74"><enum>(3)</enum><header>Illiquid fund
distributable amount</header><text>The term <term>illiquid fund distributable
amount</term> means, with respect to any illiquid asset donor advised fund of
any sponsoring organization for any taxable year, an amount equal to 5 percent
of the value of the assets in such fund as determined at the end of the
preceding taxable year.</text>
</paragraph></subsection><subsection id="id7E3942CAA6D34FE2B23264BCB9DECEB9"><enum>(e)</enum><header>Qualifying
distribution</header><text>For purposes of this section—</text>
<paragraph id="idA5BDD63233F1448D9A3B611865B2A60E"><enum>(1)</enum><header>In
general</header><text>The term <term>qualifying distribution</term>
means—</text>
<subparagraph id="id14BAAE7E1C0B476D805629494856C6A1"><enum>(A)</enum><text>any amount paid
by the sponsoring organization from a donor advised fund to any organization
described in section 170(b)(1)(A) (other than any organization described in
section 509(a)(3) or any sponsoring organization if such amount is for
maintenance in a donor advised fund), and</text>
</subparagraph><subparagraph id="idF9A5FB34F4334F08A398E7C842AA1A6B"><enum>(B)</enum><text>any amount set
aside in such donor advised fund for purposes, and under procedures similar to
those, described in section 4942(g)(2).</text>
</subparagraph><continuation-text continuation-text-level="paragraph">Such term
shall also include any amount paid during any taxable year for reasonable and
necessary administrative expenses charged to a donor advised fund by a
sponsoring organization.</continuation-text></paragraph><paragraph id="id93C59A1A45FD4A96B3017DA207707D36"><enum>(2)</enum><header>Distributions
to sponsoring organizations</header><text>Such term shall include any
distribution to a sponsoring organization.</text>
</paragraph><paragraph id="id2CE23BA223A142F59E0BE29BC7908135"><enum>(3)</enum><header>Purpose of
distribution</header><text>Each qualifying distribution shall be taken into
account in determining whether each of the requirements of paragraphs (1), (2),
and (3) of subsection (a) are met, except that only qualifying distributions
from a donor advised fund shall be taken into account in determining whether
the requirements of paragraphs (2) and (3) of subsection (a) are met with
respect to the fund.</text>
</paragraph><paragraph id="id47D3DF41B0BB426BA081E44FCB1D741C"><enum>(4)</enum><header>Designation of
taxable year</header>
<subparagraph id="id1B4FD3079517485E816004A611DF0C20"><enum>(A)</enum><header>In
general</header><text>A sponsoring organization shall designate the taxable
years or applicable periods with respect to which any qualifying distribution
shall be applied for purposes of satisfying the distribution requirements of
such taxable year or applicable period.</text>
</subparagraph><subparagraph id="id702E3AC231B445BDA11D85435962CAA3"><enum>(B)</enum><header>Carryover of
excess distribution designations</header><text>If a sponsoring organization
designates an amount of qualifying distributions in excess of the amount
necessary to meet the distribution requirements for all taxable years and all
applicable periods, the sponsoring organization may designate such excess as a
carryover distribution which may be applied for purposes of satisfying the
distribution requirements of the succeeding 5 taxable years.</text>
</subparagraph></paragraph></subsection><subsection commented="no" display-inline="no-display-inline" id="idE385D3A9E965476DADF9695E3856CB6A"><enum>(f)</enum><header>Valuation
rules</header><text>For purposes of determining the value of any asset held by
a donor advised fund, the following rules shall apply:</text>
<paragraph commented="no" display-inline="no-display-inline" id="idAB7DBA3307084FDEB4311BBC268AAA28"><enum>(1)</enum><text>Securities for
which market quotations are readily available shall be valued at fair market
value determined on a monthly basis.</text>
</paragraph><paragraph commented="no" display-inline="no-display-inline" id="id14780C0397844CD7A0C1B2D5A0A616BD"><enum>(2)</enum><text>Cash shall be
determined on an average monthly basis.</text>
</paragraph><paragraph commented="no" display-inline="no-display-inline" id="id6D0A5866FF9346E299CBB65303E0ADB9"><enum>(3)</enum><text>Any illiquid
asset transferred by a donor to a sponsoring organization for maintenance in
such donor advised fund shall be valued in an amount equal to the sum
of—</text>
<subparagraph commented="no" display-inline="no-display-inline" id="id9949586558834D4FB67FA1A881444C3E"><enum>(A)</enum><text>the value of such
asset claimed by the donor for purposes of determining the donor's deduction
under section 170, 2055, or 2522 with respect to such transfer and reported by
the donor to the sponsoring organization (in any manner specified by the
Secretary), and</text>
</subparagraph><subparagraph commented="no" display-inline="no-display-inline" id="id147A8844AF6E4C7C9919729006FFAE57"><enum>(B)</enum><text>an assumed annual
rate of return of 5 percent of such value.</text>
</subparagraph></paragraph><paragraph commented="no" display-inline="no-display-inline" id="id95B16C0EE77A411B816698BFBB3CF4D0"><enum>(4)</enum><text>Any illiquid
asset purchased by such fund shall be valued in an amount equal to—</text>
<subparagraph commented="no" display-inline="no-display-inline" id="id72797A36863640E3A5259ADF15D8659C"><enum>(A)</enum><text>the purchase
price paid for such asset by such fund, and</text>
</subparagraph><subparagraph commented="no" display-inline="no-display-inline" id="id76303E7AEC8A4F6581E21997B2012926"><enum>(B)</enum><text>an assumed annual
rate of return of 5 percent of such value.</text>
</subparagraph></paragraph></subsection><subsection id="id6761C6C61692472B9F121B516007DBFE"><enum>(g)</enum><header>Sponsoring
organization; donor advised fund</header><text>For purposes of this
subchapter—</text>
<paragraph id="idBC686934B6574DA78AEED9C75C8D7872"><enum>(1)</enum><header>Sponsoring
organization</header><text>The term <term>sponsoring organization</term> means
any organization which—</text>
<subparagraph id="idE6681C3D5CAF4E5696F305E402880F55"><enum>(A)</enum><text>is described in
section 170(c) (other than in paragraph (1) thereof, and without regard to
paragraph (2)(A) thereof), and</text>
</subparagraph><subparagraph id="id3AA1A8EEC4FF4A8AAA6358B6261B179B"><enum>(B)</enum><text>maintains 1 or
more donor advised funds.</text>
</subparagraph></paragraph><paragraph id="idAA76E3C28CAE4AF18FC87E617EC32B3D"><enum>(2)</enum><header>Donor advised
fund</header>
<subparagraph id="idA28586B1EE6A4393BDD62F1944167D4F"><enum>(A)</enum><header>In
general</header><text>Except as provided in subparagraph (B), the term
<term>donor advised fund</term> means a fund or account—</text>
<clause id="id563D451E3B4C4FCF8EB7D95AF9AEEDA2"><enum>(i)</enum><text>which is
separately identified by reference to contributions of a donor or
donors,</text>
</clause><clause id="idC975388C43224E6A8AB4FDA688D2DB5B"><enum>(ii)</enum><text>which is owned
and controlled by a sponsoring organization, and</text>
</clause><clause id="id341325DA35DF4E8E91650A9A2529C3A3"><enum>(iii)</enum><text>with respect to
which a donor or any person appointed or designated by such person) has, or
reasonably expects to have, advisory privileges with respect to the
distribution or investment of amounts held in such fund or account by reason of
the donor's status as a donor.</text>
</clause></subparagraph><subparagraph id="id5A8853C43A8F4259928ED22355602143"><enum>(B)</enum><header>Exception</header><text>The
term <term>donor advised fund</term> shall not include any fund or account with
respect to which a person described in subparagraph (A)(iii) advises as to
which individuals receive grants for travel, study, or other similar purposes,
but only if—</text>
<clause id="idC60D083EC75F4E298FFB4E4355FA1B03"><enum>(i)</enum><text>such person's
advisory privileges are performed exclusively by such person in the person's
capacity as a member of a committee appointed by the sponsoring
organization,</text>
</clause><clause id="idDF6FFC1310584E5FB2927B39C02C3644"><enum>(ii)</enum><text>no combination
of persons described in subparagraph (A)(iii) (or persons related to such
persons) control, directly or indirectly, such committee, and</text>
</clause><clause id="id286F3F99C3594E97AB2E43323AB583D5"><enum>(iii)</enum><text>all grants from
such fund or account satisfy requirements similar to those described in section
4945(g) (concerning grants to individuals by private foundations).</text>
</clause></subparagraph><subparagraph id="id213AE1716C1C47AB830421261A00F287"><enum>(C)</enum><header>Secretarial
authority</header><text>The Secretary may exempt a fund or account from
treatment as a donor advised fund which—</text>
<clause id="id534E19F301E74217B2B8D1D3AAF43C6D"><enum>(i)</enum><text>is advised by
committee not directly or indirectly controlled by the donor or advisor (and
any related parties), or</text>
</clause><clause id="id2D64E93EE9F34EC58303E9EFE2A9E586"><enum>(ii)</enum><text>will benefit a
single identified organization or governmental entity or a single identified
charitable purpose.</text>
</clause></subparagraph></paragraph></subsection><subsection id="ID5406c54d71a34ff6aeb5e49ad9882577"><enum>(h)</enum><header>Other
definitions</header><text>For purposes of this section—</text>
<paragraph id="IDb2fc0b14267246eda3d8a2032e7d8426"><enum>(1)</enum><header>Taxable
period</header><text>The term <term>taxable period</term> means, with respect
to the undistributed amount for any taxable year, the period beginning with the
first day of the taxable year and ending on the earlier of—</text>
<subparagraph id="ID2e626a4625e44cd2a9f76388bd247c2c"><enum>(A)</enum><text>the date of
mailing of a notice of deficiency with respect to the tax imposed by subsection
(a) under section 6212, or</text>
</subparagraph><subparagraph id="IDca19adce39f245fcb52dd0f76ed7d4dc"><enum>(B)</enum><text>the date on which
the tax imposed by subsection (a) is assessed.</text>
</subparagraph></paragraph><paragraph id="id3D33CE86448C40F3966693F907DEBAE3"><enum>(2)</enum><header>Applicable
period</header><text>The term <term>applicable period</term> means, with
respect to any donor advised fund of any sponsoring organization, a
3-consecutive taxable year period determined under the following rules:</text>
<subparagraph id="id65537C588CF74E308A15A36BFC032E31"><enum>(A)</enum><text>The first
applicable 3-consecutive taxable year period for any donor advised fund shall
begin on the first day of the first taxable year of the sponsoring organization
beginning after the date such fund has been in existence for 1 year.</text>
</subparagraph><subparagraph id="idDAD65E5375654661ADAF41E2034C85E6"><enum>(B)</enum><text>Any applicable
3-consecutive taxable year period after the first such period shall begin on
the day after the termination of any preceding applicable 3-consecutive taxable
year period with respect to such donor advised fund.</text>
</subparagraph></paragraph></subsection><subsection id="idC6C2879648C7403A8BEEB1C299B76468"><enum>(i)</enum><header>Regulations</header><text>The
Secretary may issue such regulations as are necessary to carry out the purposes
of this section, including regulations regarding—</text>
<paragraph id="id48DE71814F594ED5B0F0ABA2EC1B8B62"><enum>(1)</enum><text>the acceptable
methods for calculating the organization level undistributed amount for
sponsoring organizations,</text>
</paragraph><paragraph id="idB44F0F5CACC749068B5B3B0DCE55B851"><enum>(2)</enum><text>the allowable
adjustments in the determination of the value of any illiquid asset where the
asset value has declined significantly after a contribution to, or purchase by,
the donor advised fund, and</text>
</paragraph><paragraph id="id3C3F4F8F47734D339CBAE96E234CEAC7"><enum>(3)</enum><text>the treatment or
disregard of transactions designed to avoid the application of the illiquid
asset rules, such as through exchanges of illiquid assets for other
assets.</text>
</paragraph></subsection></section><section id="idC0CEDCEE6FE64197889328D0433E3F5E"><enum>4968.</enum><header>Taxes on
prohibited distributions</header>
<subsection id="ID1672741a02c348e0bd186119da3a0af3"><enum>(a)</enum><header>Imposition of
taxes</header>
<paragraph id="IDfb019d188d104edf8be8d953be4ffac1"><enum>(1)</enum><header>On the donor or
donor advisor</header><text>There is hereby imposed on the advice of any person
described in section 4967(g)(2)(C) to have a sponsoring organization of a donor
advised fund make a taxable distribution from such fund a tax equal to 20
percent of the amount thereof. The tax imposed by this paragraph shall be paid
by such person who advised the sponsoring organization of the donor advised
fund to make the distribution.</text>
</paragraph><paragraph id="IDe0888f45a33b4ae496d80613402aa526"><enum>(2)</enum><header>On the fund
management</header><text>There is hereby imposed on the agreement of any fund
manager to the making of a distribution, knowing that it is a taxable
distribution, a tax equal to 5 percent of the amount thereof, unless such
agreement is not willful and is due to reasonable cause. The tax imposed by
this paragraph shall be paid by any fund manager who agreed to the making of
the distribution.</text>
</paragraph></subsection><subsection id="ID35491e3f06ee45b88fa13dfca1c99e08"><enum>(b)</enum><header>Joint and
several liability</header><text>For purposes of subsection (a), if more than
one person is liable under subsection (a)(1) or (a)(2) with respect to the
making of a taxable distribution, all such persons shall be jointly and
severally liable under such paragraph with respect to such distribution.</text>
</subsection><subsection id="idEFA8E92DC478428083AECFA9978F337B"><enum>(c)</enum><header>Taxable
distribution</header><text>For purposes of this subsection, the term
<term>taxable distribution</term> means any distribution from a donor advised
fund to any person other than the sponsoring organization's non donor advised
funds or accounts or organizations described in section 170(b)(1)(A) (other
than any organization described in section 509(a)(3) or any sponsoring
organization if such amount is for maintenance in a donor advised fund).</text>
</subsection><subsection id="ID720b1910342d48e899a1c9eb11b5d29e"><enum>(d)</enum><header>Fund
manager</header><text>For purposes of this subchapter, the term <term>fund
manager</term> means, with respect to any sponsoring organization of a donor
advised fund—</text>
<paragraph id="ID778b7b1d40b04490babc564088dab9fd"><enum>(1)</enum><text>an officer,
director, or trustee of such sponsoring organization (or an individual having
powers or responsibilities similar to those of officers, directors, or trustees
of the sponsoring organization), and</text>
</paragraph><paragraph id="IDefaf7e5d0bd74854914325d9d0857e55"><enum>(2)</enum><text>with respect to
any act (or failure to act), the employees of the sponsoring organization
having authority or responsibility with respect to such act (or failure to
act).</text>
</paragraph></subsection></section><section id="id01E2246741A94E069748FD17883D99C2"><enum>4969.</enum><header>Taxes on
prohibited benefits</header>
<subsection id="id7A67DB588022441EB00F15C69B194B45"><enum>(a)</enum><header>Imposition of
taxes</header>
<paragraph id="id73A3106DCA0C4B359BAE9F2CFC30EBA2"><enum>(1)</enum><header>On the donor,
donor advisor, or related person</header><text>There is hereby imposed on the
advice of any person described in subsection (c) to have a sponsoring
organization of a donor advised fund make a distribution from such fund which
results in such a person receiving, directly or indirectly, a more than
incidental benefit as a result of such distribution, a tax equal to 25 percent
of the amount of such distribution. The tax imposed by this paragraph shall be
paid by such person who advised the sponsoring organization of the donor
advised fund to make the distribution.</text>
</paragraph><paragraph id="idAF3A7D98A48042B398ED94434852B9BB"><enum>(2)</enum><header>On the
recipient of the benefit</header><text>There is hereby imposed on any person
described in subsection (c) who receives a benefit described in paragraph (1),
a tax equal to 25 percent of the amount of the distribution described in
paragraph (1).</text>
</paragraph><paragraph id="id2103731505DA41999A473B62BAB910D3"><enum>(3)</enum><header>On the fund
management</header><text>There is hereby imposed on the agreement of any fund
manager to the making of a distribution, knowing that such distribution would
confer a benefit described in paragraph (1), a tax equal to 10 percent of the
amount of such distribution, unless such agreement is not willful and is due to
reasonable cause. The tax imposed by this paragraph shall be paid by any fund
manager who agreed to the making of the distribution.</text>
</paragraph></subsection><subsection commented="no" display-inline="no-display-inline" id="id652F746AC7C44054BD2552C4F8C3FD1D"><enum>(b)</enum><header>Joint and
several liability</header><text>For purposes of subsection (a), if more than
one person is liable under subsection (a)(1), (a)(2), or (a)(3) with respect to
the making of a distribution described in subsection (a), all such persons
shall be jointly and severally liable under such paragraph with respect to such
distribution.</text>
</subsection><subsection commented="no" display-inline="no-display-inline" id="id1FB7FA6D27ED4500A17144A9282661F5"><enum>(c)</enum><header>Donor, donor
advisor, or related person</header><text>A person is described in this
subsection if such person is described in section 4958(f)(1)(D) (determined
without regard to any investment
advisor).</text>
</subsection></section></subchapter><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="idE384EF2FD259460BA001745D7AC27D7E"><enum>(b)</enum><header>Abatement of
taxes allowed</header><text>Section 4963 is amended—</text>
<paragraph id="idAF13B990FD444C4AABF85D082F88CD5C"><enum>(1)</enum><text>by inserting
<quote>4967, 4968, 4969,</quote> after <quote>4958,</quote> each place it
appears in subsections (a) and (c),</text>
</paragraph><paragraph id="id6D0E18516FFE4D23B3DC070270384138"><enum>(2)</enum><text>by inserting
<quote>4967,</quote> after <quote>4958,</quote> in subsection (b),</text>
</paragraph><paragraph id="idBB106437C7AA4C0F87CAC75FC56F7CDB"><enum>(3)</enum><text>in subsection
(d)(2), by striking <quote>and</quote> at the end of subparagraph (B), by
striking the period at the end of subparagraph (C) and inserting <quote>,
and</quote>, and by adding at the end the following new subparagraph:</text>
<quoted-block display-inline="no-display-inline" id="id6113FF4C27ED48E498C89DEFDD951B82" style="OLC">
<subparagraph id="id1D3518FB023D47698526C6063C3A10A6"><enum>(D)</enum><text>in the case of
the second tier tax imposed by section 4967(b), reducing the amount of the
undistributed amount to zero.</text>
</subparagraph><after-quoted-block>,
and</after-quoted-block></quoted-block>
</paragraph><paragraph id="id9BD1FBB703B543058EB2A334F287997B"><enum>(4)</enum><text>in subsection
(e)(2), by redesignating subparagraphs (C) and (D) as subparagraphs (E) and
(F), respectively, and by inserting after subparagraph (B) the following new
subparagraphs:</text>
<quoted-block display-inline="no-display-inline" id="id811CDBD73EAB440A98A4D74585F6E36F" style="OLC">
<subparagraph id="idCDD7B1E26F0C40C1978708A3D6B0FF53"><enum>(C)</enum><text>in the case of
section 4967(a)(1), on the first day of the taxable year for which there was a
failure to distribute,</text>
</subparagraph><subparagraph id="id4B17710B8B0F499299F435B0DF51AF19"><enum>(D)</enum><text>in the case of
paragraph (2) or (3) of section 4967(a), on the 121st day of the taxable year
for which there was a failure to
distribute,</text>
</subparagraph><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph></subsection><subsection id="idA085844052B14F889E833A5A6F809407"><enum>(c)</enum><header>Conforming
amendment</header><text>The table of subchapters of chapter 42 is amended by
adding at the end the following new item:</text>
<quoted-block display-inline="no-display-inline" id="id35ADFC05F86E4159AA3B4B5579D21C59" style="OLC">
<toc regeneration="no-regeneration">
<toc-entry level="subchapter">Subchapter G. Donor advised
funds.</toc-entry>
</toc>
<after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="idD3FB7CD81AE84428A0F62871434C8D83"><enum>(d)</enum><header>Effective
date</header><text>The amendments made by this section shall apply to taxable
years beginning after the date of the enactment of this Act.</text>
</subsection></section><section id="idEBEEBFFCEB9A40578E3AA4FD975B54C3"><enum>332.</enum><header>Prohibited
transactions</header>
<subsection id="idCC0DFDEBD1364921BD850E85ADA7B1D8"><enum>(a)</enum><header>Disqualified
persons</header>
<paragraph id="idE2983CDE1BF14000B071083B89E2D33B"><enum>(1)</enum><header>In
general</header><text>Paragraph (1) of section 4958(f) is amended by striking
<quote>and</quote> at the end of subparagraph (B), by striking the period at
the end of subparagraph (C) and inserting <quote>, and</quote>, and by adding
after subparagraph (C) the following new subparagraph:</text>
<quoted-block display-inline="no-display-inline" id="idE978FAC262E2485191C7B7D45A7F5B70" style="OLC">
<subparagraph id="id3D8CE9717A9741788B08BB583110F718"><enum>(D)</enum><text>any person who is
described in paragraph (7) with respect to any sponsoring organization (as
defined in section
4967(g)(1)).</text>
</subparagraph><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph><paragraph id="id58D7183490F54C079A8BFFDC53B88384"><enum>(2)</enum><header>Donors, donor
advisors, and investment advisors treated as disqualified
persons</header><text>Section 4958(f) is amended by adding at the end the
following new paragraph:</text>
<quoted-block display-inline="no-display-inline" id="idDDDF7A323FBA48CE884A957B00804CE5" style="OLC">
<paragraph id="id3C0B077155C649C98645312772CA6BB7"><enum>(7)</enum><header>Donors, donor
advisors, and investment advisors with respect to sponsoring
organizations</header><text>For purposes of paragraph (1)(D)—</text>
<subparagraph id="idFF9ABC45CBEB46E795D9048370EB84B4"><enum>(A)</enum><header>In
general</header><text>A person is described in this paragraph if such
person—</text>
<clause id="id515F11655C954D458B0B86FF5695666E"><enum>(i)</enum><text>is described in
section 4967(g)(2)(C),</text>
</clause><clause id="idE69805811DA740A8A2458E9D7BC06900"><enum>(ii)</enum><text>is an investment
advisor,</text>
</clause><clause id="idA8DD3F2D23A542EDA07FC78DA31C54B8"><enum>(iii)</enum><text>is a member of
the family of an individual described in clause (i) or (ii), or</text>
</clause><clause id="id9A9453F95AFB49C2AB7D24E0EBE44BEE"><enum>(iv)</enum><text>is a 35-percent
controlled entity (as defined in paragraph (3) by substituting <quote>persons
described in clause (i), (ii), or (iii) of paragraph (7)(A)</quote> for
<quote>persons described in subparagraph (A) or (B) of paragraph (1)</quote> in
subparagraph (A)(i) thereof).</text>
</clause></subparagraph><subparagraph id="id1A06177A3435445C9BE13F427A41730B"><enum>(B)</enum><header>Investment
advisor</header><text>The term <term>investment advisor</term> means, with
respect to any sponsoring organization (as defined in section 4967(g)(1)), any
person (other than an employee of such organization) compensated by such
organization for managing the investment of, or providing investment advice
with respect to, assets maintained in donor advised funds (as defined in
section 4967(g)(2)) owned by such
organization.</text>
</subparagraph></paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph><paragraph id="idC7A3C20FB092415F88514FC5C50F5284"><enum>(3)</enum><header>Donors, donor
advisors, and investment advisors treated as disqualified persons with respect
to a sponsoring organization which is a private
foundation</header><text>Section 4946(a)(1) is amended by striking
<quote>and</quote> at the end of subparagraph (H), by striking the period at
the end of subparagraph (I) and inserting <quote>, and</quote>, and by adding
at the end the following new subparagraph:</text>
<quoted-block display-inline="no-display-inline" id="id7515C1CDA39E49A3AC2C38126DD64A25" style="OLC">
<subparagraph id="id47C471A54B1E43FCB185380D92B01756"><enum>(J)</enum><text>a person
described in section
4958(f)(1)(D).</text>
</subparagraph><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph></subsection><subsection id="id9BA315A573F549E9BC0DCD6EC76F1BCC"><enum>(b)</enum><header>Certain
transactions treated as excess benefit transactions</header>
<paragraph id="id00D17CBE7B8D4C1ABBB73771D0D71FD7"><enum>(1)</enum><header>In
general</header><text>Section 4958(c) is amended by redesignating paragraph (2)
as paragraph (3) and by inserting after paragraph (1) the following new
paragraph:</text>
<quoted-block display-inline="no-display-inline" id="id3DE9F6AB2E8E46889A0D7F334B6C0E65" style="OLC">
<paragraph id="id5109D67910B049F4A78138F4A8E18FF8"><enum>(2)</enum><header>Special rules
for donor advised funds owned by sponsoring organizations</header><text>In the
case of any donor advised fund (as defined in section 4967(g)(2)) of a
sponsoring organization (as defined in section 4967(g)(1))—</text>
<subparagraph id="id1B7BD4ED38D94E64AC9BA1DFD451AA76"><enum>(A)</enum><text>the term
<term>excess benefit transaction</term> includes any grant, loan, compensation,
or other payment provided by the sponsoring organization in connection with
such fund to a person described in subsection (f)(1)(D) (determined without
regard to any investment advisor) with respect to such fund, and</text>
</subparagraph><subparagraph id="idAC85426DF16948E3B022A5E08B26C697"><enum>(B)</enum><text>the term
<term>excess benefit</term> includes, with respect to any transaction described
in subparagraph (A), the amount of any such grant, loan, compensation, or other
payment.</text>
</subparagraph><continuation-text continuation-text-level="paragraph">Notwithstanding the last sentence of
subsection (e), a sponsoring organization shall be treated as an applicable
tax-exempt organization to the extent necessary to carry out this
paragraph.</continuation-text></paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph><paragraph id="id593DFFF683D54F48BFF5D0122BDB2F59"><enum>(2)</enum><header>Special rule
for correction of transaction</header><text>Section 4958(f)(6) is amended by
inserting <quote>, except that in the case of any correction of an excess
benefit transaction described in subsection (c)(2), no amount repaid in a
manner prescribed by the Secretary may be held in, or credited to, any donor
advised fund</quote> after <quote>standards</quote>.</text>
</paragraph></subsection><subsection id="id9122A94272644F4D81789203601DA40E"><enum>(c)</enum><header>Effective
date</header><text>The amendments made by this section shall apply to taxable
years beginning after the date of the enactment of this Act.</text>
</subsection></section><section id="id1EEA0AF72D7E48E39A4BECA461211BD4"><enum>333.</enum><header>Treatment of
charitable contribution deductions to donor advised funds</header>
<subsection id="idD55CF7B75E5B4A40AEA5EED15AD73A16"><enum>(a)</enum><header>Income</header><text>Section
170(f) (relating to disallowance of deduction in certain cases and special
rules), as amended by section 318 of this Act, is amended by adding at the end
the following new paragraph:</text>
<quoted-block display-inline="no-display-inline" id="id1D175DF5E20842E9A05B1AB2823525EF" style="OLC">
<paragraph id="id700EBE1E628C4635B90584D678F78895"><enum>(17)</enum><header>Contributions
to donor advised funds</header><text>A deduction otherwise allowed under
subsection (a) for any contribution to a sponsoring organization (as defined in
section 4967(g)(1)) to be maintained in any donor advised fund (as defined in
section 4967(g)(2)) of such organization shall only be allowed if—</text>
<subparagraph id="idE6D3B02443E54CBF885ED858A6CE98FA"><enum>(A)</enum><text>such sponsoring
organization is not described in paragraph (3), (4), or (5) of section 170(c)
or section 509(a)(3), and</text>
</subparagraph><subparagraph id="id002F319A7835479DB1B329C9041B2CE7"><enum>(B)</enum><text>the taxpayer
obtains a contemporaneous written acknowledgment (determined under rules
similar to the rules of paragraph (8)(C)) from the sponsoring organization that
such organization has exclusive legal control over the assets
contributed.</text>
</subparagraph></paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="id1B480E4B755445CFAAAC769BD89E43A8"><enum>(b)</enum><header>Estate</header><text>Section
2055(e) is amended by adding at the end the following new paragraph:</text>
<quoted-block display-inline="no-display-inline" id="id2F9E0403D8104F6AB9543AB060719035" style="OLC">
<paragraph id="idD465EC47C87747CBBD02005FD46A9D6C"><enum>(5)</enum><header>Contributions
to donor advised funds</header><text>A deduction otherwise allowed under
subsection (a) for any contribution to a sponsoring organization (as defined in
section 4967(g)(1)) to be maintained in any donor advised fund (as defined in
section 4967(g)(2)) of such organization shall only be allowed if—</text>
<subparagraph id="idCFA40D55AC28475BA374937DC29063F1"><enum>(A)</enum><text>such sponsoring
organization is not described in paragraph (3) or (4) of subsection (a) or
section 509(a)(3), and</text>
</subparagraph><subparagraph id="idB301B3536F1A4E4AB2AD3EB411BA2755"><enum>(B)</enum><text>the taxpayer
obtains a contemporaneous written acknowledgment (determined under rules
similar to the rules of section 170(f)(8)(C)) from the sponsoring organization
that such organization has exclusive legal control over the assets
contributed.</text>
</subparagraph></paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="idC2995B205874451C8FCE5E0117E1E279"><enum>(c)</enum><header>Gift</header><text>Section
2522(c) is amended by adding at the end the following new paragraph:</text>
<quoted-block display-inline="no-display-inline" id="id27BE2991F1CF4ED9BB1B07ADB8BB55A9" style="OLC">
<paragraph id="id4ABB4DB4CC0043C2B6FD10B7845A33DF"><enum>(13)</enum><header>Contributions
to donor advised funds</header><text>A deduction otherwise allowed under
subsection (a) for any contribution to a sponsoring organization (as defined in
section 4967(g)(1)) to be maintained in any donor advised fund (as defined in
section 4967(g)(2)) of such organization shall only be allowed if—</text>
<subparagraph id="id822BD9DC86854DBBBF80D09ACE92D7C9"><enum>(A)</enum><text>such sponsoring
organization is not described in paragraph (3) or (4) of subsection (a) or
section 509(a)(3), and</text>
</subparagraph><subparagraph id="idA4091DC27E58478B86134198EF1A53A1"><enum>(B)</enum><text>the taxpayer
obtains a contemporaneous written acknowledgment (determined under rules
similar to the rules of section 170(f)(8)(C)) from the sponsoring organization
that such organization has exclusive legal control over the assets
contributed.</text>
</subparagraph></paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="id0158CA6F72A84DB4AA0DCBA54C20AF17"><enum>(d)</enum><header>Effective
date</header><text>The amendments made by this section shall apply to
contributions made after the date which is 180 days after the date of the
enactment of this Act.</text>
</subsection></section><section id="id38C00E5B047C4388A785014304E26EF9"><enum>334.</enum><header>Returns of,
and applications for recognition by, sponsoring organizations</header>
<subsection id="id9CA2CD2605484BFB8A4267EEC829EF0E"><enum>(a)</enum><header>Matters
included on returns</header>
<paragraph id="id1F25A77CE5C64B7BAE1962FA14C75C10"><enum>(1)</enum><header>In
general</header><text>Section 6033 is amended by redesignating subsection (h)
as subsection (i) and by inserting after subsection (g) the following new
subsection:</text>
<quoted-block display-inline="no-display-inline" id="id99A05E8AB607411F8EF28BCF96C5D3DF" style="OLC">
<subsection id="idE2042882F18A435D877DE7FCD3C97A45"><enum>(h)</enum><header>Additional
provisions relating to sponsoring organizations</header><text>Every
organization described in section 4967(g)(1) shall, on the return required
under subsection (a) for the taxable year—</text>
<paragraph id="id28C2E30FAD474416B83D0061CDC6FCBF"><enum>(1)</enum><text>list the total
number of donor advised funds (as defined in section 4967(g)(2)) it owns at the
end of such taxable year,</text>
</paragraph><paragraph id="idECDB3D19649E467099D7DA10127C6AF1"><enum>(2)</enum><text>indicate the
aggregate value of assets held in such funds at the end of such taxable year,
and</text>
</paragraph><paragraph id="id15771989D0E84319A158B90F441AD477"><enum>(3)</enum><text>indicate the
aggregate contributions to and grants made from such funds during such taxable
year.</text>
</paragraph></subsection><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph><paragraph id="id3A40153A8154410484B5D2AD4D3526B8"><enum>(2)</enum><header>Extension of
statute of limitations</header><text>Section 6501(c) is amended by adding at
the end the following new paragraph:</text>
<quoted-block display-inline="no-display-inline" id="idD85C7FBB59AE435FA872C25DCF446466" style="OLC">
<paragraph id="idF93FFFBCBD264841BB567B1858717F77"><enum>(11)</enum><header>Donor advised
funds</header><text>If a sponsoring organization (as defined in section
4967(g)(1)) fails to include on any return for any taxable year any information
with respect to any donor advised fund of such organization which is required
under section 6033(h) to be included with such return, the time for assessment
of any tax imposed under subchapter G of chapter 42 with respect to any
distribution from such donor advised fund shall not expire before the date
which is 3 years after the date on which the secretary is furnished the
information so
required.</text>
</paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph><paragraph commented="no" display-inline="no-display-inline" id="idC782737CB2404FEAAC1B58724C33344E"><enum>(3)</enum><header>Effective
date</header><text>The amendments made by this subsection shall apply to
returns filed for taxable years ending after the date of the enactment of this
Act.</text>
</paragraph></subsection><subsection commented="no" display-inline="no-display-inline" id="id5EDB85DF753E4D01ACF14308FC08E42B"><enum>(b)</enum><header>Matters
included on exempt status application</header>
<paragraph commented="no" display-inline="no-display-inline" id="id7146F139054E442EBA53091DA8482E7D"><enum>(1)</enum><header>In
general</header><text>Section 508 is amended by adding at the end the following
new subsection:</text>
<quoted-block display-inline="no-display-inline" id="id77952B6D27A1459EBBA76E91631A5456" style="OLC">
<subsection commented="no" display-inline="no-display-inline" id="id7187C6A4742A4C5EBF2A23622E51E6AE"><enum>(f)</enum><header>Additional
provisions relating to sponsoring organizations</header><text>A sponsoring
organization (as defined in section 4967(g)(1)) shall give notice to the
Secretary (in such manner as the Secretary may provide) whether such
organization maintains or intends to maintain donor advised funds (as defined
in section 4967(g)(2)) and the manner in which such organization plans to
operate such
funds.</text>
</subsection><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph><paragraph commented="no" display-inline="no-display-inline" id="id844B7D96EB454720A1ED411F48C1CA79"><enum>(2)</enum><header>Effective
date</header><text>The amendment made by this subsection shall apply to
organizations applying for tax-exempt status after the date of the enactment of
this Act.</text>
</paragraph></subsection></section></part><part id="id03C3CC8809444DAAB041F42422EE0F41"><enum>III</enum><header>Improved
accountability of supporting organizations</header>
<section id="idA29AE444C20A45449A6B62F92E850A7A"><enum>341.</enum><header>Requirements
for supporting organizations</header>
<subsection id="id1F0EDC33552545489914DD7221405074"><enum>(a)</enum><header>Types of
supporting organizations</header><text>Subparagraph (B) of section 509(a)(3) is
amended to read as follows:</text>
<quoted-block display-inline="no-display-inline" id="idB8442AD47C294FEC9A82996307B26E72" style="OLC">
<subparagraph id="idBAEAF1D3A6DE4C868120559D969C2A06"><enum>(B)</enum><text>is—</text>
<clause id="id5B5C2E7CEA964D44B56EC19272F1667C"><enum>(i)</enum><text>operated,
supervised, or controlled by one or more organizations described in paragraph
(1) or (2),</text>
</clause><clause id="idC1C3A1B2F8914B65980C334407E8ED96"><enum>(ii)</enum><text>supervised or
controlled in connection with one or more such organizations, or</text>
</clause><clause commented="no" display-inline="no-display-inline" id="idB72F05D4215D4DECB5730BE04E51AF03"><enum>(iii)</enum><text>operated in
connection with one or more such organizations,
and</text>
</clause></subparagraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="idC70C902B4B9D40A39A98D039A5BAC0DD"><enum>(b)</enum><header>Requirements
for supporting organizations</header><text display-inline="yes-display-inline">Section 509 (relating to private foundation
defined) is amended by adding at the end the following new subsection:</text>
<quoted-block display-inline="no-display-inline" id="id92C0A4CD6327422FBEC62A83830335CE" style="OLC">
<subsection id="id437A0A4A9F514AE29399EFF3265645FB"><enum>(f)</enum><header>Requirements
for supporting organizations</header>
<paragraph id="idC8A67BB4D74846E4A8E065106346E3E9"><enum>(1)</enum><header>Type III
supporting organizations</header><text>For purposes of subsection
(a)(3)(B)(iii), an organization shall not be considered to be operated in
connection with any organization described in paragraph (1) or (2) of
subsection (a) unless such organization meets the following
requirements:</text>
<subparagraph id="id0461F4538577440989A9509A2E3C97D9"><enum>(A)</enum><header>Application
requirement</header><text>The organization provides to the Secretary, as a part
of any notification filed under section 508(a) after the date of the enactment
of this subsection, a letter from each supported organization acknowledging
that the supported organization has been designated by such organization as a
supported organization.</text>
</subparagraph><subparagraph id="idE9AF8260FEA6461BABF522BFE6171268"><enum>(B)</enum><header>Responsiveness</header><text>For
each taxable year beginning after the date of the enactment of this subsection,
the organization provides to each supported organization such information as
the Secretary may require to ensure that such organization is responsive to the
needs or demands of the supported organization.</text>
</subparagraph><subparagraph id="idD9C4FC54FEE4474DB3A1258020DAA046"><enum>(C)</enum><header>Supported
organizations</header>
<clause id="id440C6FC168724E5081BF7CE4F67D98FD"><enum>(i)</enum><header>In
general</header><text>The organization—</text>
<subclause id="id991F5116F9CC4FE4B021E7DD6F9FEBC4"><enum>(I)</enum><text>is not operated
in connection with more than 5 supported organizations, and</text>
</subclause><subclause id="idDACB036DAA0148C9A5CFD2483DE7047C"><enum>(II)</enum><text>is not operated
in connection with any supported organization that is not organized in the
United States on any date after the date which is 180 days after the date of
the enactment of this subsection.</text>
</subclause></clause><clause id="idB4630A80BBA043AD88EE74905C68AF1C"><enum>(ii)</enum><header>Special rule
for existing organizations</header><text>If the organization is operated in
connection with more than 5 supported organizations on the date of the
enactment of this subsection—</text>
<subclause id="id9D6E524F5CB64E6B8A016DE093A4B581"><enum>(I)</enum><text>clause (i)(I)
shall not apply, and</text>
</subclause><subclause id="idFEEB8E9A50BC43D4AFC81BE5DAA6D4E7"><enum>(II)</enum><text>the organization
may not be operated in connection with any other organization after such date
unless the total number of supported organizations is 5 or less.</text>
</subclause></clause></subparagraph><subparagraph id="id038CF06760984E5BBFCDC771752935BB"><enum>(D)</enum><header>Contributions
to donor advised funds</header><text>The organization makes no contributions to
or for the use of any donor advised fund (as defined in section
4967(g)(2)).</text>
</subparagraph></paragraph><paragraph id="idCF715B9DE4AB4C9D917E7A6A28964039"><enum>(2)</enum><header>Organizations
controlled by donors</header>
<subparagraph id="id5B1AF22A199E4E0F99A90143E52205B9"><enum>(A)</enum><header>In
general</header><text>For purposes of subsection (a)(3)(B), an organization
shall not be considered to be—</text>
<clause id="id4176E25264CD4E1F9772179B9E370308"><enum>(i)</enum><text>operated,
supervised, or controlled by any organization described in paragraph (1) or (2)
of subsection (a), or</text>
</clause><clause id="idB747B4ECF9B14FADA2666F3732E47C3E"><enum>(ii)</enum><text>operated in
connection with any organization described in paragraph (1) or (2) of
subsection (a),</text>
</clause><continuation-text continuation-text-level="subparagraph">if such
organization accepts any gift or contribution from any person described in
subparagraph (B).</continuation-text></subparagraph><subparagraph id="id73A236C6F9C94628B797054745C859E4"><enum>(B)</enum><header>Person
described</header><text>A person is described in this subparagraph if such
person is—</text>
<clause id="idC2D3266210644A70A4F618B139DABFA9"><enum>(i)</enum><text>a
person (other than an organization described in paragraph (1), (2), or (4) of
section 509(a)) who controls, directly or indirectly, either alone or together
with persons described in clauses (ii) and (iii), the governing body of a
supported organization,</text>
</clause><clause commented="no" id="id5250CBA3334F4D98B5EC6E3AEF05CD5C"><enum>(ii)</enum><text>a member of the
family (determined under section 4958(f)(4)) of an individual described in
clause (i), or</text>
</clause><clause id="idC48481943AE64D628BBA9DD35AFA3BEC"><enum>(iii)</enum><text>a 35-percent
controlled entity (as defined in section 4958(f)(3) by substituting
<quote>persons described in clause (i) or (ii) of section 509(f)(2)(B)</quote>
for <quote>persons described in subparagraph (A) or (B) of paragraph
(1)</quote> in subparagraph (A)(i) thereof).</text>
</clause></subparagraph></paragraph><paragraph id="id994BBF5B3E7945768B765F3CCB5EE276"><enum>(3)</enum><header>Supported
organization</header><text>For purposes of this subsection, the term
<term>supported organization</term> means, with respect to an organization
described in subsection (a)(3), an organization described in paragraph (1) or
(2) of subsection (a)—</text>
<subparagraph id="id0D4A9B322276419EB8489E8E9690C770"><enum>(A)</enum><text>for whose benefit
the organization described in subsection (a)(3) is organized and operated,
or</text>
</subparagraph><subparagraph id="idEFC366D0490049E399A32C6EC931DFCD"><enum>(B)</enum><text>with respect to
which the organization performs the functions of, or carries out the purposes
of.</text>
</subparagraph></paragraph></subsection><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="id04D57F82C82A46DFB5BD1BD5923768D5"><enum>(c)</enum><header>Charitable
trusts which are type III supporting organizations</header><text>For purposes
of section 509(a)(3)(B)(iii) of the Internal Revenue Code of 1986, an
organization which is a trust shall not be considered to be operated in
connection with any organization described in paragraph (1) or (2) of section
509(a) of such Code solely because—</text>
<paragraph id="id2197F8994F58446F849AFE7CC2778B15"><enum>(1)</enum><text>it is a
charitable trust under State law,</text>
</paragraph><paragraph id="id0B795DF4C09744A8B2698909695A3F37"><enum>(2)</enum><text>the supported
organization (as defined in section 509(f)(3) of such Code) is a beneficiary of
such trust, and</text>
</paragraph><paragraph id="idAD8EFCA19DED4C52BD71015FA4060272"><enum>(3)</enum><text>the supported
organization (as so defined) has the power to enforce the trust and compel an
accounting.</text>
</paragraph></subsection><subsection id="idAEC432DE2C7C449DA6BA7A932AA4CA9A"><enum>(d)</enum><header>Effective
date</header><text>The amendments made by this section shall take effect on the
date of the enactment of this Act.</text>
</subsection></section><section id="id60BF3F6A4DF14F3692D87E22303DFF08"><enum>342.</enum><header>Excise tax on
supporting organizations for failure to meet distribution requirements</header>
<subsection id="idA9C028DE881F4F95B803D4EEA9FE8540"><enum>(a)</enum><header>In
general</header><text>Subchapter D of chapter 42 (relating to failure by
certain charitable organizations to meet certain qualification requirements) is
amended by adding at the end the following new section:</text>
<quoted-block display-inline="no-display-inline" id="idD8D14F56B98D43A3B487EBAD70F43B50" style="OLC">
<section id="id44844250F2954DF0B6CCCAC1B6FF0875"><enum>4959.</enum><header>Taxes on
certain supporting organizations failing to meet distribution
requirements</header>
<subsection id="id27C7FC4AE66D4920AA987E50DDAA3CD2"><enum>(a)</enum><header>Initial
tax</header><text>There is hereby imposed on the undistributed income of any
type III supporting organization for any taxable year, which has not been
distributed before the first day of the second (or any succeeding) taxable year
following such taxable year (if such first day falls within the taxable
period), a tax equal to 30 percent of the amount of such income remaining
undistributed at the beginning of such second (or succeeding) taxable
year.</text>
</subsection><subsection id="id4AE09E15A94741F1BA5FE7C04C1F498F"><enum>(b)</enum><header>Additional
tax</header><text>In any case in which an initial tax is imposed under
subsection (a) on the undistributed income of a type III supporting
organization for any taxable year, if any portion of such income remains
undistributed at the close of the taxable period, there is hereby imposed a tax
equal to 100 percent of the amount remaining undistributed at such time.</text>
</subsection><subsection id="id9C207529DB3D436083435B07BE8CB154"><enum>(c)</enum><header>Undistributed
income</header><text>For purposes of this section, the term <term>undistributed
income</term> means, with respect to any type III supporting organization for
any taxable year as of any time, the amount by which—</text>
<paragraph id="idD4FCC37280DC46F8A66DDAAB050212D0"><enum>(1)</enum><text>the distributable
amount for such taxable year, exceeds</text>
</paragraph><paragraph id="id9843385ECC6F49A9A69CD3C78A789192"><enum>(2)</enum><text>the qualifying
distributions made before such time out of such distributable amount.</text>
</paragraph></subsection><subsection id="id7F62B3859C8649CBA8D4713F524317D4"><enum>(d)</enum><header>Distributable
amount</header><text>For purposes of this section—</text>
<paragraph id="id7C475EDEA9BD4D4C969837EF632A40C0"><enum>(1)</enum><header>In
general</header><text>the term <term>distributable amount</term> means, with
respect to any type III supporting organization for any taxable year, an amount
equal to the sum of—</text>
<subparagraph id="id8DB3A307FA6B4781A0C0FA3C16081FB6"><enum>(A)</enum><text>the greater
of—</text>
<clause id="id1E8B5E319D694F6597A98861886099B0"><enum>(i)</enum><text>85 percent of the
adjusted net income (as defined in section 4942(f)) of the type III supporting
organization for the preceding taxable year, or</text>
</clause><clause id="id4F2A4F6F95E1465EA78EA2F10BD35DF0"><enum>(ii)</enum><text>5 percent of the
fair market value of the aggregate assets of such organization (other than
assets used or held to perform the functions of, or carry out the purposes of,
a supported organization) on the last day of the preceding taxable year,
and</text>
</clause></subparagraph><subparagraph id="idD74B94810C224404A3F129AEF932C01E"><enum>(B)</enum><text>any amount
received during the preceding taxable year which is a repayment of amounts paid
by the organization in any prior taxable year to a supported organization
exclusively for the benefit of such supported organization or to perform the
functions of, or carry out the purposes of such supported organization.</text>
</subparagraph></paragraph><paragraph id="id5782E75B68CF4FF4A058EF07ACF9667F"><enum>(2)</enum><header>Investment
assets</header><text>For purposes of paragraph (1)(A)(ii), assets held for
investment or for the operation of an unrelated trade or business shall not be
considered as assets used or held to perform the functions of, or carry out the
purposes of, a supported organization.</text>
</paragraph></subsection><subsection id="id97876CF9441E45FABCE83E0E6721D6ED"><enum>(e)</enum><header>Qualifying
distribution</header><text>For purposes of this section—</text>
<paragraph id="id532C9AD307EE45129021ACBD5D561FEE"><enum>(1)</enum><header>In
general</header><text>The term <term>qualifying distribution</term> means
amounts paid by the type III supporting organization to or for the use of a
supported organization.</text>
</paragraph><paragraph id="id123C38C4D45A4827872CD5ECD46A6ECF"><enum>(2)</enum><header>Administrative
and operating expenses</header><text>Administrative and operating expenses of a
type III supporting organization shall not be treated as a qualifying
distribution to a supported organization.</text>
</paragraph></subsection><subsection id="idF6616F3489544770AA1F3665CF425769"><enum>(f)</enum><header>Treatment of
qualifying distributions</header>
<paragraph id="idCA02532F79DE438394BB205C7BFAE630"><enum>(1)</enum><header>In
general</header><text>Except as provided in paragraph (2), any qualifying
distribution made during a taxable year shall be treated as made—</text>
<subparagraph id="id5C5F15831AF74EC4A0A60EB416871299"><enum>(A)</enum><text>first out of the
undistributed income of the immediately preceding taxable year (if the type III
supporting organization was subject to the tax imposed by this section for such
preceding taxable year) to the extent thereof, and</text>
</subparagraph><subparagraph id="id295A8E7284D641CD87CB3356B5867930"><enum>(B)</enum><text>second out of the
undistributed income for the taxable year to the extent thereof.</text>
</subparagraph><continuation-text continuation-text-level="paragraph">For
purposes of this paragraph, distributions shall be taken into account in the
order of time in which made.</continuation-text></paragraph><paragraph id="idA988D87D8100461F89F907C717524D99"><enum>(2)</enum><header>Correction of
deficient distributions for prior taxable years, etc</header><text>In the case
of any qualifying distribution which (under paragraph (1)) is not treated as
made out of the undistributed income of the immediately preceding taxable year,
the type III supporting organization may elect to treat any portion of such
distribution as made out of the undistributed income of a designated prior
taxable year. The election shall be made by the type III supporting
organization at such time and in such manner as the Secretary shall by
regulations prescribe.</text>
</paragraph></subsection><subsection id="ID397b129a4c784e6394e9f3c51ae55428"><enum>(g)</enum><header>Adjustment of
distributable amount where distributions during prior years have exceeded
income</header>
<paragraph id="IDe3840f77d63a43efb549c3dcea76d4ef"><enum>(1)</enum><header> In
general</header><text>If, for the taxable years in the adjustment period for
which an organization is a type III supporting organization—</text>
<subparagraph id="ID07c55c66522a45f0a63a92cdb9b1f76e"><enum>(A)</enum><text>the aggregate
qualifying distributions treated (under subsection (f)) as made out of the
undistributed income for such taxable years, exceed</text>
</subparagraph><subparagraph id="ID4f64a8a00dcb499db78c6285d728dcf3"><enum>(B)</enum><text>the distributable
amounts for such taxable years (determined without regard to this
subsection),</text>
</subparagraph><continuation-text continuation-text-level="paragraph">then, for
purposes of this section (other than subsection (f)), the distributable amount
for the taxable year shall be reduced by an amount equal to such excess.</continuation-text></paragraph><paragraph id="ID7786c061a5684e54bf2d2ea79ae7185b"><enum>(2)</enum><header>Taxable years
in adjustment period</header><text>For purposes of paragraph (1), with respect
to any taxable year of a type III supporting organization, the taxable years in
the adjustment period are the taxable years (not exceeding 5) beginning after
the date of the enactment of this section and immediately preceding the taxable
year.</text>
</paragraph></subsection><subsection id="idF2B5B5863C67476F8A134312DB89AABE"><enum>(h)</enum><header>Other
definitions</header><text>For purposes of this section—</text>
<paragraph id="idB201BCC8C85241C99A67C0A4F5AB5ED3"><enum>(1)</enum><header>Taxable
period</header><text>The term <term>taxable period</term> means, with respect
to the undistributed income for any taxable year, the period beginning with the
first day of the taxable year and ending on the earlier of—</text>
<subparagraph id="id7FA32CC2AAC3492F921DFFE40449A8E3"><enum>(A)</enum><text>the date of
mailing of a notice of deficiency with respect to the tax imposed by subsection
(a) under section 6212, or</text>
</subparagraph><subparagraph id="idD52B144871A84191BC78068DDD337E7C"><enum>(B)</enum><text>the date on which
the tax imposed by subsection (a) is assessed.</text>
</subparagraph></paragraph><paragraph id="id3881348839004784B910909902C2EE02"><enum>(2)</enum><header>Type III
supporting organization</header><text>The term <term>type III supporting
organization</term> means an organization which meets the requirements of
subparagraphs (A) and (C) of section 509(a)(3) and which is operated in
connection with one or more organizations described in paragraph (1) or (2) of
section 509(a).</text>
</paragraph><paragraph id="id4B2FD5DC0E724AED80B851F5266A3248"><enum>(3)</enum><header>Supported
organization</header><text>The term <term>supported organization</term> has the
meaning given such term under section
509(f)(3).</text>
</paragraph></subsection></section><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="id7128D92AB75F41A19AEEE40E61A7CAE0"><enum>(b)</enum><header>Conforming
amendment</header><text>The table of section for subchapter D of chapter 42 is
amended by inserting after the item relating to section 4958 the following new
item:</text>
<quoted-block display-inline="no-display-inline" id="id83B33B5584B842568374899EF8CCC88D" style="OLC">
<toc>
<toc-entry level="section">Sec. 4959. Taxes on certain supporting
organizations failing to meet distribution
requirements.</toc-entry>
</toc>
<after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="idE7B6886DC59B4883B53EB182540462FD"><enum>(c)</enum><header>Effective
date</header><text>The amendments made by this section shall apply to taxable
years beginning after the date of the enactment of this Act.</text>
</subsection></section><section id="idC937EC7F256349D49CA70323440E3180"><enum>343.</enum><header>Excess benefit
transactions</header>
<subsection id="idA740764F69944CEBBF42CE67B5BDE6C7"><enum>(a)</enum><header>In
general</header><text>Section 4958(c), as amended by section 332 of this Act,
is amended by redesignating paragraph (3) as paragraph (4) and by inserting
after paragraph (2) the following new paragraph:</text>
<quoted-block display-inline="no-display-inline" id="id9E04A4B2180540F2ACB9EDEAEE905BD9" style="OLC">
<paragraph id="id6BE474DE49E44AFDBC385758F38B94E8"><enum>(3)</enum><header>Special rules
for supporting organizations</header>
<subparagraph id="id115C6C2049C0435BB2977170CF876A24"><enum>(A)</enum><header>In
general</header><text>In the case of any organization described in section
509(a)(3)—</text>
<clause id="id9E257573191449E1880180BAC4DADE9A"><enum>(i)</enum><text>the term
<term>excess benefit transaction</term> includes—</text>
<subclause id="id1CC8A43D31394A8F80F64844AC3B8346"><enum>(I)</enum><text>any grant, loan,
compensation, or other payment provided by such organization to a person
described in subparagraph (B), and</text>
</subclause><subclause id="id39231CC4DB0F4EF88370A6840496FC28"><enum>(II)</enum><text>any loan
provided by such organization to a disqualified person (other than an
organization described in paragraph (1), (2), or (4) of section 509(a)),
and</text>
</subclause></clause><clause id="idB57A2DEEEFDF41F7B506AC689B075B6B"><enum>(ii)</enum><text>the term
<term>excess benefit</term> includes, with respect to any transaction described
in clause (i), the amount of any such grant, loan, compensation, or other
payment.</text>
</clause></subparagraph><subparagraph id="id26527EFEFD454367AB554FF72D689E88"><enum>(B)</enum><header>Person
described</header><text>A person is described in this subparagraph if such
person is—</text>
<clause id="idB1670D4D9E7A406E81FD8E0DA9002784"><enum>(i)</enum><text>a
substantial contributor to such organization,</text>
</clause><clause commented="no" id="idFCEC9F695C894E92B394077C04865D19"><enum>(ii)</enum><text>a member of the
family (determined under section 4958(f)(4)) of an individual described in
clause (i), or</text>
</clause><clause id="id1C06E9A82E574F53AFD0EECA490EAB15"><enum>(iii)</enum><text>a 35-percent
controlled entity (as defined in section 4958(f)(3) by substituting
<quote>persons described in clause (i) or (ii) of section 4958(c)(3)(B)</quote>
for <quote>persons described in subparagraph (A) or (B) of paragraph
(1)</quote> in subparagraph (A)(i) thereof).</text>
</clause></subparagraph><subparagraph id="id0AF81B667FFB436EB78E70BEA5D85225"><enum>(C)</enum><header>Substantial
contributor</header><text>For purposes of this paragraph—</text>
<clause id="id0C70F5D55C354736A7299963DE634750"><enum>(i)</enum><header>In
general</header><text>The term <term>substantial contributor</term> means any
person who contributed or bequeathed an aggregate amount of more than $5,000 to
the organization, if such amount is more than 2 percent of the total
contributions and bequests received by the organization before the close of the
taxable year of the organization in which the contribution or bequest is
received by the organization from such person. In the case of a trust, such
term also means the creator of the trust.</text>
</clause><clause id="id87D2521057F2461892C0AD170A0E8F98"><enum>(ii)</enum><header>Exception</header><text>Such
term shall not include any organization described in paragraph (1), (2), or (4)
of section
509(a).</text>
</clause></subparagraph></paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="id8B38C643DBA04F159357458BBF287605"><enum>(b)</enum><header>Disqualified
persons</header><text>Paragraph (1) of section 4958(f), as amended by section
332 of this Act, is amended by striking <quote>and</quote> at the end of
subparagraph (D), by striking the period at the end of subparagraph (E) and
inserting <quote>, and</quote>, and by adding after subparagraph (D) the
following new subparagraph:</text>
<quoted-block display-inline="no-display-inline" id="id9EA3D2DC586F432E93B2033A89105E2B" style="OLC">
<subparagraph id="id01344A68599746718ACAE954A0B21CC5"><enum>(E)</enum><text>any person who is
described in subparagraph (A), (B), or (C) with respect to an organization
described in section 509(a)(3) which is organized and operated exclusively for
the benefit of, to perform the functions of, or to carry out the purposes of
the applicable tax-exempt
organization.</text>
</subparagraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="idCAC8A56E208D46CA93B63559C28EAAC8"><enum>(c)</enum><header>Effective
date</header><text>The amendments made by this section shall apply to
transactions occurring after the date of the enactment of this Act.</text>
</subsection></section><section id="idCA630763E30949828224C19CCA3692BC"><enum>344.</enum><header>Excess
business holdings of supporting organizations</header>
<subsection id="id4CF49764CA4246A98E4A42CC9F59F178"><enum>(a)</enum><header>In
general</header><text display-inline="yes-display-inline">Section 4943 is
amended by adding at the end the following new subsection:</text>
<quoted-block display-inline="no-display-inline" id="id4908BC6BE4014056B89890B1EDCED043" style="OLC">
<subsection id="idD865E362F65542B5B84D4E5BC5B57A55"><enum>(e)</enum><header>Application of
tax to supporting organizations</header>
<paragraph id="idDDF555BBFB9E4F7B981DDF4514D53476"><enum>(1)</enum><header>In
general</header><text>For purposes of this section, a qualified supporting
organization shall be treated as a private foundation.</text>
</paragraph><paragraph id="id67BD0571D34E4C708B293D05D838047B"><enum>(2)</enum><header>Exception</header><text>The
Secretary may exempt any qualified supporting organization from the application
of this subsection if the Secretary determines that the excess business
holdings of such organization are consistent with the purpose or function
constituting the basis for its exemption under section 501.</text>
</paragraph><paragraph id="id392E230A2944419A9F8244FE3FB1A172"><enum>(3)</enum><header>Qualified
supporting organization</header><text>For purposes of this subsection, the term
<term>qualified supporting organization</term> means any—</text>
<subparagraph id="id7638671D71494734B7B7B3CCFA03457D"><enum>(A)</enum><text>type III
supporting organization (as defined in section 4959(h)(2)), or</text>
</subparagraph><subparagraph id="id2AF79634A77D4F92BB94276E4386DB9E"><enum>(B)</enum><text>any organization
which meets the requirements of subparagraphs (A) and (C) of section 509(a)(3)
and which is supervised or controlled in connection with or one or more
organizations described in paragraph (1) or (2) of section 509(a), but only if
such organization accepts any gift or contribution from any person described in
section 509(f)(2)(B).</text>
</subparagraph></paragraph><paragraph id="id39FE01E72BCE488281BFF621D2D4DAC4"><enum>(4)</enum><header>Disqualified
person</header>
<subparagraph id="idE062E6EE087E41DCB2FDD450E31D4365"><enum>(A)</enum><header>In
general</header><text>In applying this section to any organization described in
section 509(a)(3), the term <term>disqualified person</term> means, with
respect to the organization—</text>
<clause id="id73BCCF9349BE469296464DA566C19B26"><enum>(i)</enum><text>any person who
was, at any time during the 5-year period ending on date described in
subsection (a)(2)(A), in a position to exercise substantial influence over the
affairs of the organization,</text>
</clause><clause id="id162EBF733C3F4468900AC4751EF10389"><enum>(ii)</enum><text>any member of
the family (determined under section 4958(f)(4)) of an individual described in
clause (i),</text>
</clause><clause id="id02F8B8D227EE4F059816E41C3724C9BA"><enum>(iii)</enum><text>any 35-percent
controlled entity (as defined in section 4958(f)(3) by substituting
<quote>persons described in clause (i) or (ii) of section 4943(e)(2)(A)</quote>
for <quote>persons described in subparagraph (A) or (B) of paragraph
(1)</quote> in subparagraph (A)(i) thereof),</text>
</clause><clause id="idDF50A6A16D344547832CD065967120E7"><enum>(iv)</enum><text>any person
described in section 4958(c)(3)(B)), and</text>
</clause><clause id="id498EDB6FDC5946E5B52409C2FFA658C7"><enum>(v)</enum><text>any
organization—</text>
<subclause id="id8D2AAECA71874BD98F97029F74EEA6E4"><enum>(I)</enum><text>which is
effectively controlled (directly or indirectly) by the same person or persons
who control the organization in question, or</text>
</subclause><subclause id="id2D05421B1812423D81161F5878DD76E1"><enum>(II)</enum><text>substantially
all of the contributions to which were made (directly or indirectly) by the
same person or persons described in subparagraph (B) or a member of their
family (within the meaning of section 4946(d)) who made (directly or
indirectly) substantially all of the contributions to the organization in
question.</text>
</subclause></clause></subparagraph><subparagraph id="id46472B3485F54E2AAAF52A541FD8E750"><enum>(B)</enum><header>Persons
described</header><text>A person is described in this subparagraph if such
person is—</text>
<clause id="id27F890AE1FE046DBAD27D5E62228C89F"><enum>(i)</enum><text>a
substantial contributor to the organization (as defined in section
4958(c)(3)(C)),</text>
</clause><clause id="id240F7F077C1E4B36934079DFD4A059FC"><enum>(ii)</enum><text>an officer,
director, or trustee of the organization (or an individual having powers or
responsibilities similar to those officers, directors, or trustees of the
organization), or</text>
</clause><clause id="idC686D5AD04B04009BF94F0F43F44EF4A"><enum>(iii)</enum><text>an owner of
more than 20 percent of—</text>
<subclause id="idAE2941AB597E4A04863CD000CEDA982A"><enum>(I)</enum><text>the total
combined voting power of a corporation,</text>
</subclause><subclause id="id77CB80B3DEF64A98BCCE3C2FFA664B49"><enum>(II)</enum><text>the profits
interest of a partnership, or</text>
</subclause><subclause id="id2A32534E3D7A445FBB245402E7052AE8"><enum>(III)</enum><text>the beneficial
interest of a trust or unincorporated enterprise,</text>
</subclause><continuation-text continuation-text-level="clause">which is a
substantial contributor (as so defined) to the organization.</continuation-text></clause></subparagraph></paragraph><paragraph id="idA48135224AAD4FF7B9E2828C9E22BF61"><enum>(5)</enum><header>Present
holdings</header><text>For purposes of this subsection, rules similar to the
rules of paragraphs (4), (5), and (6) of subsection (c) shall apply to
organizations described in section 509(a)(3), except that—</text>
<subparagraph id="idBD0FB6A335A148D6BC7DA3FF8F0D86AB"><enum>(A)</enum><text><quote>the date
of the enactment of this subsection</quote> shall be substituted for <quote>May
26, 1969</quote> each place it appears in paragraphs (4), (5), and (6),
and</text>
</subparagraph><subparagraph id="id0F9CC7BCC9A54913AB62DC79A42B9720"><enum>(B)</enum><text><quote>January 1,
2007</quote> shall be substituted for <quote>January 1, 1970</quote> in
paragraph
(4)(E).</text>
</subparagraph></paragraph></subsection><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="id414D73BB7CBF4E1B95BC001791DDE4E4"><enum>(b)</enum><header>Effective
date</header><text>The amendment made by this section shall apply to taxable
years beginning after the date of the enactment of this Act.</text>
</subsection></section><section id="id4D655DE51D19483084B412CC51CF0F33"><enum>345.</enum><header>Treatment of
amounts paid to supporting organizations by private foundations</header>
<subsection id="id6D63311DA88446C8A8200D180E5C8E44"><enum>(a)</enum><header>Qualifying
distributions</header><text>Paragraph (4) of section 4942(g) is amended to read
as follows:</text>
<quoted-block display-inline="no-display-inline" id="idC41089E0E21D492F8E586035D9090BFD" style="OLC">
<paragraph id="id0A0A7879E73E47048ECF144ADBD748AA"><enum>(4)</enum><header>Limitation on
distributions by nonoperating private foundations to supporting
organizations</header><text>For purposes of this section, the term
<term>qualifying distribution</term> shall not include any amount paid by a
private foundation which is not an operating foundation to an organization
described in section
509(a)(3).</text>
</paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="id9DA6FBCF0A324843BED848C2BA5A949C"><enum>(b)</enum><header>Taxable
expenditures</header>
<paragraph id="id44EBBC391AEB46128232C95AFD7D5E35"><enum>(1)</enum><header>In
general</header><text>Subsection (d) of section 4945 is amended by
redesignating paragraphs (4) and (5) as paragraphs (5) and (6), respectively,
and by inserting after paragraph (3) the following new paragraph:</text>
<quoted-block display-inline="no-display-inline" id="id46A5EFDAD5C7445AA941C73F116F218F" style="OLC">
<paragraph id="idE141D1A4994A4CD5A5F5742C0926128E"><enum>(4)</enum><text>to an
organization described in section
509(a)(3),</text>
</paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph><paragraph id="idEBC01C0B9B8F4EFF87B57ADDFA28E622"><enum>(2)</enum><header>Conforming
amendments</header>
<subparagraph id="idCCF21DD5A6B747B5A9ABB77663907A91"><enum>(A)</enum><text>Section
4945(d)(5), as redesignated by subparagraph (A), is amended—</text>
<clause id="idEB56ED066A48425A802F10E18780BB3D"><enum>(i)</enum><text>by
striking <quote>a grant to an organization</quote> and inserting <quote>a grant
to any other organization</quote>, and</text>
</clause><clause id="idA7937DAEC03C4FA0A3BDFE34E20D58B5"><enum>(ii)</enum><text>by
striking <quote>paragraph (1), (2), or (3) of section 509(a)</quote> in
subparagraph (A) and inserting <quote>paragraph (1) or (2) of section
509(a)</quote>.</text>
</clause></subparagraph><subparagraph id="id841C279850AE4E0383C6421000973168"><enum>(B)</enum><text>Section 4945(f)
is amended by striking <quote>Subsection (d)(4)</quote> in the last sentence
thereof and inserting <quote>Subsection (d)(5)</quote>.</text>
</subparagraph><subparagraph id="idDCA3A74541214C5DADAB78C9110EDF07"><enum>(C)</enum><text>Section 4945(h)
is amended by striking <quote>subsection (d)(4)</quote> and inserting
<quote>subsection (d)(5)</quote>.</text>
</subparagraph></paragraph></subsection><subsection id="id65C5BFE385104AF7AF2CA9027FF3F285"><enum>(c)</enum><header>Effective
date</header><text>The amendments made by this section shall apply to
distributions and expenditures after the date of the enactment of this
Act.</text>
</subsection></section><section id="id5C26C596895D422C8A790BC7B83642A0"><enum>346.</enum><header>Returns of
supporting organizations</header>
<subsection id="id591EF3C355604E109D54108FE05F1398"><enum>(a)</enum><header>Requirement to
file return</header><text>Subparagraph (C) of section 6033(a)(3), as
redesignated by section 411, is amended by striking clause (iv) and by
redesignating clauses (v) and (vi) as clauses (iv) and (v),
respectively.</text>
</subsection><subsection id="id2B8446BA878D41C8980BDFEF911DB0EE"><enum>(b)</enum><header>Matters
included on returns</header><text>Section 6033, as amended by section 334 of
this Act, is amended by redesignating subsection (i) as subsection (j) and by
inserting after subsection (h) the following new subsection:</text>
<quoted-block display-inline="no-display-inline" id="idBCA900E10DE44CE7952CCA6E69B97638" style="OLC">
<subsection id="idDB393A96A33944FAB52898F6C667436B"><enum>(i)</enum><header>Additional
provisions relating to supporting organizations</header>
<paragraph id="id6DA410C2A3B44A5DA80B3C599A7EE7C9"><enum>(1)</enum><header>In
general</header><text>Every organization described in section 509(a)(3) shall,
on the return required under subsection (a)—</text>
<subparagraph id="idB4A33385783F429FABB1EDC4AAFD5232"><enum>(A)</enum><text>list the
organizations described in section 509(a)(3)(A) with respect to which such
organization provides support,</text>
</subparagraph><subparagraph id="idF9C0C54E253D47DE906D82C02D959F34"><enum>(B)</enum><text>indicate whether
the organization meets the requirements of clause (i), (ii), or (iii) of
section 509(a)(3)(B), and</text>
</subparagraph><subparagraph id="id38CFC7535BE041CF8C474DF856FEBA31"><enum>(C)</enum><text>certify that the
organization meets the requirements of section 509(a)(3)(C).</text>
</subparagraph></paragraph><paragraph id="idD0C1889E5A504B69B0F3D3E30CD850B6"><enum>(2)</enum><header>Type III
supporting organizations</header><text>Every type III supporting organization
(as defined in section 4959(h)(2)) shall indicate on the return required under
subsection (a) for the taxable year whether the organization has received a
letter from each supported organization (as defined in section 509(f)(3))
during the taxable year which—</text>
<subparagraph id="id979D1DFE58B44479A7B56E1C68110CA6"><enum>(A)</enum><text>acknowledges that
the supporting organization has designated such organization as a supported
organization,</text>
</subparagraph><subparagraph id="id3BB941E09CDE4FD1B98CB4B6A0201142"><enum>(B)</enum><text>details the type
of support provided by the supporting organization, and</text>
</subparagraph><subparagraph id="id57E0C7E2EB3844F0B5731FB2254F5CDB"><enum>(C)</enum><text>explains how such
support furthers the charitable purpose of the supported
organization.</text>
</subparagraph></paragraph></subsection><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection commented="no" display-inline="no-display-inline" id="id492FECADDCF04D5A98143D0027084BCA"><enum>(c)</enum><header>Effective
date</header><text>The amendments made by this section shall apply to returns
filed for taxable years ending after the date of the enactment of this
Act.</text>
</subsection></section></part></subtitle><enum>IV</enum><header>Miscellaneous
provisions</header>
<section id="ID972BDEC447FA4C41954C7ABB57A70E1F"><enum>401.</enum><header>Restructuring
of New York Liberty Zone tax credits</header>
<subsection id="ID6E611678858B4451AB6EF77444DEAF71"><enum>(a)</enum><header>In
General</header><text>Subchapter Y of chapter 1 is amended by adding at the end
the following new section:</text>
<quoted-block display-inline="no-display-inline" id="id7550DAACC274462B973DF3E37C5465A3" style="OLC">
<section id="ID7EA69A7CC8054BA1948FA4D28DCD950E"><enum>1400M.</enum><header>New York
Liberty Zone tax credits</header>
<subsection id="IDE074FDBFB4494C8BBD930A36EB488458"><enum>(a)</enum><header>In
general</header><text>There shall be allowed as a credit against any taxes
imposed by this title (other than by section 3111(a), section 3403, or subtitle
D) paid or incurred by any governmental unit of the State of New York and the
City of New York, New York (including any agency or instrumentality thereof)
for any calendar year an amount equal to the lesser of—</text>
<paragraph id="id5324F2BAD9F44006ABA91DD321C0ACB0"><enum>(1)</enum><text>the total
expenditures during such year by such governmental unit for qualifying
projects, or</text>
</paragraph><paragraph id="id9B018266888E4CEBAD1A3D58CF98CF8A"><enum>(2)</enum><text>the amount
allocated to such governmental unit for such calendar year under subsection
(b)(2).</text>
</paragraph></subsection><subsection id="ID1E344745E0FA42A49CB8598B526044C3"><enum>(b)</enum><header>Qualifying
project</header><text>For purposes of this section—</text>
<paragraph id="id94E5D317AA954A78A209A80BE74D946F"><enum>(1)</enum><header>In
general</header><text>The term <term>qualifying project</term> means any
transportation infrastructure project, including highways, mass transit
systems, railroads, airports, ports, and waterways, in or connecting with the
New York Liberty Zone (as defined in section 1400L(h)), which is designated as
a qualifying project under this section jointly by the Governor of the State of
New York and the Mayor of the City of New York, New York.</text>
</paragraph><paragraph id="id4DF2843DBDB7466FAC7914D4AA54D670"><enum>(2)</enum><header>Dollar
limitation</header>
<subparagraph id="id7704B83973C44072B868AA35BAAA6801"><enum>(A)</enum><header>In
general</header><text>The Governor of the State of New York and the Mayor of
the City of New York, New York, shall jointly allocate to a governmental unit
the amount of expenditures which may be taken into account under subsection (a)
for any calendar year in the credit period with respect to a qualifying
project.</text>
</subparagraph><subparagraph id="idB3A927988C8F44B984E53E0A9BA3ACE3"><enum>(B)</enum><header>Aggregate
limit</header><text>The aggregate amount which may be allocated under
subparagraph (A) for all calendar years in the credit period shall not exceed
$2,000,000,000.</text>
</subparagraph><subparagraph id="id516705D4830F445693E54E657834227B"><enum>(C)</enum><header>Annual
limit</header><text>The aggregate amount which may be allocated under
subparagraph (A) for any calendar year in the credit period shall not exceed
the sum of—</text>
<clause id="idFBA082E20A3F4147AA238600450F8BB7"><enum>(i)</enum><text>$200,000,000,
plus</text>
</clause><clause id="id496FFA8696494B0F91B5F9D92F64BAB4"><enum>(ii)</enum><text>the aggregate
amount authorized to be allocated under this paragraph for all preceding
calendar years in the credit period which was not so allocated.</text>
</clause></subparagraph><subparagraph id="idF75A62FE7D184949896DA51C1C2CF398"><enum>(D)</enum><header>Unallocated
amounts at end of credit period</header><text>If, as of the close of the credit
period, the amount under subparagraph (B) exceeds the aggregate amount
allocated under subparagraph (A) for all calendar years in the credit period,
the Governor of the State of New York and the Mayor of the City of New York,
New York, may jointly allocate for any calendar year following the credit
period for expenditures with respect to qualifying projects which may be taken
into account under subsection (a) an amount equal to such excess, reduced by
the aggregate amount allocated under this subparagraph for all preceding
calendar years.</text>
</subparagraph></paragraph></subsection><subsection id="ID895D0A08E6FF45C5809B693C9E3B8292"><enum>(c)</enum><header>Carryover of
unused allocations</header>
<paragraph id="ID29E18E1FEFE54C34B55EB1FBA4AC7931"><enum>(1)</enum><header>In
general</header><text>If the amount allocated under subsection (b)(2) to a
governmental unit for any calendar year exceeds the total expenditures for such
year by such governmental unit for qualifying projects, the allocation of such
governmental unit for the succeeding calendar year shall be increased by the
amount of such excess.</text>
</paragraph><paragraph id="ID078E132A38AB4CBBB2712E8771563194"><enum>(2)</enum><header>Reallocation</header><text>If
a governmental unit does not use an amount allocated to it under subsection
(b)(2) within the time prescribed by the Governor of the State of New York and
the Mayor of the City of New York, New York, then such amount shall after such
time be treated for purposes of subsection (b)(2) in the same manner as if it
had never been allocated.</text>
</paragraph></subsection><subsection id="ID48D4B49FF33541848F113B966151A855"><enum>(d)</enum><header>Definitions and
special rules</header><text>For purposes of this section—</text>
<paragraph id="idE3092CB2E5E8400E8C8730394D899178"><enum>(1)</enum><header>Credit
period</header><text>The term <term>credit period</term> means the 10-year
period beginning on January 1, 2006.</text>
</paragraph><paragraph id="id66B7E627D9F645C694918B103AF4D679"><enum>(2)</enum><header>Treatment of
funds</header><text>Any expenditure for a qualifying project taken into account
for purposes of the credit under this section shall be considered State and
local funds for the purpose of any Federal program.</text>
</paragraph></subsection><subsection id="ID05C50A983C624D0DB898E73E0DE3AD50"><enum>(e)</enum><header>Regulations</header><text>The
Secretary may prescribe such regulations as are necessary to ensure compliance
with the purposes of this
section.</text>
</subsection></section><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="ID9DE780776CB74FD18A818FFF50EBB165"><enum>(b)</enum><header>Termination of
Certain New York Liberty Zone Benefits</header>
<paragraph id="ID533515C455194DE5AF1B988DFDC52E20"><enum>(1)</enum><header>Special
allowance and expensing</header><text>Section 1400L(b)(2)(A)(v) is amended by
striking <quote>the termination date</quote> and inserting <quote>the date of
the enactment of the Tax Relief Act of 2005 or the termination date if pursuant
to a binding contract in effect on such enactment date</quote>.</text>
</paragraph><paragraph id="IDED59891C767E4038B9E2282683921192"><enum>(2)</enum><header>Leasehold</header><text>Section
1400L(c)(2)(B) is amended by striking <quote>before January 1, 2007</quote> and
inserting <quote>on or before the date of the enactment of the Tax Relief Act
of 2005 or before January 1, 2007, if pursuant to a binding contract in effect
on such enactment date</quote>.</text>
</paragraph><paragraph id="IDACC28DCA9F5D4C8CAA0A666A84FD01DC"><enum>(3)</enum><header>Replacement
period</header><text>Section 1400L(g) is amended by adding at the end the
following new sentence: <quote>The preceding sentence shall apply only to any
property with respect to which an election under section 1033(a)(2) is made by
the taxpayer before the date of the enactment of the Tax Relief Act of
2005.</quote>.</text>
</paragraph></subsection><subsection id="id27DEC75190D84A80B2257830F55949BC"><enum>(c)</enum><header>Conforming
amendment</header><text>The table of sections for subchapter Y of chapter 1 is
amended by adding at the end the following new items:</text>
<quoted-block display-inline="no-display-inline" id="id8A115FD0B4A34C86883C78170CE262A4" style="OLC">
<toc>
<toc-entry bold="off" level="section">Sec. 1400M. New York Liberty
Zone tax
credits.</toc-entry>
</toc>
<after-quoted-block>.</after-quoted-block></quoted-block>
</subsection></section><section id="idD94F0243075341F883AD8726088C2893"><enum>402.</enum><header>Modification
to S corporation passive investment income rules</header>
<subsection id="id2111AE276B2045518E0004B4BAEAD910"><enum>(a)</enum><header>Increased
percentage limit</header><text>Paragraph (2) of section 1375(a) is amended by
striking <quote>25 percent</quote> and inserting <quote>60
percent</quote>.</text>
</subsection><subsection id="idD781F91728FC45A196FB7A92F42B8342"><enum>(b)</enum><header>Repeal of
excessive passive income as a termination event</header>
<paragraph id="id06D60B637ECF4D0EB1AFD5B24CB44F7E"><enum>(1)</enum><header>In
general</header><text>Section 1362(d) is amended by striking paragraph
(3).</text>
</paragraph><paragraph id="idE089DD8874C147B89FF50E70D935F346"><enum>(2)</enum><header>Conforming
amendment</header><text>Subsection (b) of section 1375 is amended—</text>
<subparagraph id="idCA90D9A096C54A929DF45840374C79B3"><enum>(A)</enum><text>by redesignating
paragraph (4) as paragraph (5), and</text>
</subparagraph><subparagraph id="id47C43658F68A478FB9238BB3DBB73581"><enum>(B)</enum><text>by striking
paragraph (3) and inserting the following:</text>
<quoted-block display-inline="no-display-inline" id="idF054C12FAA4F4C7988363288BC9A2247" style="OLC">
<paragraph id="id46378D39085942538014F53D3B7096B9"><enum>(3)</enum><header>Passive
investment income defined</header>
<subparagraph id="idE90C5F82D3054C0AA40B908F1606D6AF"><enum>(A)</enum><text>Except as
otherwise provided in this paragraph, the term <term>passive investment
income</term> means gross receipts derived from royalties, rents, dividends,
interest, annuities, and sales or exchanges of stock or securities (gross
receipts from such sales or exchanges being taken into account for purposes of
this section only to the extent of gains therefrom).</text>
</subparagraph><subparagraph id="id712F066E933B48A7BC8CF28D3A7B9FE4"><enum>(B)</enum><header>Exception for
interest on notes from sales of inventory</header><text>The term <term>passive
investment income</term> shall not include interest on any obligation acquired
in the ordinary course of the corporation's trade or business from its sale of
property described in section 1221(a)(1).</text>
</subparagraph><subparagraph id="idFB610F28ADB047FE8474B10881AB585C"><enum>(C)</enum><header>Treatment of
certain lending or finance companies</header><text>If the S corporation meets
the requirements of section 542(c)(6) for the taxable year, the term
<term>passive investment income</term> shall not include gross receipts for the
taxable year which are derived directly from the active and regular conduct of
a lending or finance business (as defined in section 542(d)(1)).</text>
</subparagraph><subparagraph id="idDE819802B8F74690B72E449313AA8382"><enum>(D)</enum><header>Special rule
for options and commodity dealers</header>
<clause id="idDE3E8E6240AA4A6E918FC6C9A695EB9B"><enum>(i)</enum><header>In
general</header><text>In the case of any options dealer or commodities dealer,
passive investment income shall be determined by not taking into account any
gain or loss (in the normal course of the taxpayer's activity of dealing in or
trading section 1256 contracts) from any section 1256 contract or property
related to such a contract.</text>
</clause><clause id="IDcab7f26777ed42f8ade46c4be3c3d825"><enum>(ii)</enum><header>Definitions</header><text>For
purposes of this subparagraph—</text>
<subclause id="IDf1399ad162e14f75b750323a8f982c6f"><enum>(I)</enum><header>Options
dealer</header><text>The term <quote>options dealer</quote> has the meaning
given such term by section 1256(g)(8).</text>
</subclause><subclause id="ID9c749cfa397c4f62abc7ac34a6543c84"><enum>(II)</enum><header>Commodities
dealer</header><text>The term <quote>commodities dealer</quote> means a person
who is actively engaged in trading section 1256 contracts and is registered
with a domestic board of trade which is designated as a contract market by the
Commodities Futures Trading Commission.</text>
</subclause><subclause id="ID0288b51b0f2747db86a8d3b061e2058c"><enum>(III)</enum><header>Section 1256
contract</header><text>The term <quote>section 1256 contract</quote> has the
meaning given to such term by section 1256(b).</text>
</subclause></clause></subparagraph><subparagraph id="idF0D58B03A0E94DDDB889974EBB4E7B94"><enum>(E)</enum><header>Treatment of
certain dividends</header><text>If an S corporation holds stock in a C
corporation meeting the requirements of section 1504(a)(2), the term
<term>passive investment income</term> shall not include dividends from such C
corporation to the extent such dividends are attributable to the earnings and
profits of such C corporation derived from the active conduct of a trade or
business.</text>
</subparagraph><subparagraph id="id52E1966C494B44FAB6C3CCA0BD5463F9"><enum>(F)</enum><header>Exception for
banks, etc</header><text>In the case of a bank (as defined in section 581), a
bank holding company (within the meaning of section 2(a) of the Bank Holding
Company Act of 1956 (12 U.S.C. 1841(a))), or a financial holding company
(within the meaning of section 2(p) of such Act), the term <term>passive
investment income</term> shall not include—</text>
<clause id="ID83aa5cee0c4145feaaed113630179923"><enum>(i)</enum><text>interest income
earned by such bank or company, or</text>
</clause><clause id="ID75fcce10ed2442029fc4d7fb328d6e93"><enum>(ii)</enum><text>dividends on
assets required to be held by such bank or company, including stock in the
Federal Reserve Bank, the Federal Home Loan Bank, or the Federal Agricultural
Mortgage Bank or participation certificates issued by a Federal Intermediate
Credit Bank.</text>
</clause></subparagraph></paragraph><paragraph id="idCC2EA96A93CC446FAEC9D88BBF1BCCA5"><enum>(4)</enum><header>Gross receipts
from sales of capital assets (other than stock and securities)</header><text>In
the case of dispositions of capital assets (other than stock and securities),
gross receipts from such dispositions shall be taken into account only to the
extent of the capital gain net income
therefrom.</text>
</paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subparagraph></paragraph></subsection><subsection id="idDF6A9C1620F9431E909BB6BDB0A5E5D7"><enum>(c)</enum><header>Conforming
amendments</header>
<paragraph id="idDA425469CD5A4B809D112FE837FE1BEF"><enum>(1)</enum><text>Subparagraph (J)
of section 26(b)(2) is amended by striking <quote>25 percent</quote> and
inserting <quote>60 percent</quote>.</text>
</paragraph><paragraph id="idD6D463E054304953B01D10214E5B1453"><enum>(2)</enum><text>Clause (i) of
section 1042(c)(4)(A) is amended by striking <quote>section
1362(d)(3)(C)</quote> and inserting <quote>section 1375(b)(3)</quote>.</text>
</paragraph><paragraph id="id25B4DF244AC8485AAD821B810D56FB58"><enum>(3)</enum><text>Subparagraph (B)
of section 1362(f)(1) is amended by striking <quote>or (3)</quote>.</text>
</paragraph><paragraph id="id6B1FC73231114324B3AAD3333BBB737B"><enum>(4)</enum><text>Clause (i) of
section 1375(b)(1)(A) is amended by striking <quote>25 percent</quote> and
inserting <quote>60 percent</quote>.</text>
</paragraph><paragraph id="idC1ABD294500A464292C6053C9EB9CF9C"><enum>(5)</enum><text>Subsection (d) of
section 1375 is amended by striking <quote>subchapter C</quote> both places it
appears and inserting <quote>accumulated</quote>.</text>
</paragraph><paragraph id="id0392350C6EEB446BA1A30BDEAB7C0036"><enum>(6)</enum><text>The heading for
section 1375 is amended by striking <quote><header-in-text level="section" style="OLC">25 percent</header-in-text></quote> and inserting
<quote><header-in-text level="section" style="OLC">60
percent</header-in-text></quote>.</text>
</paragraph><paragraph id="id881A5BCCBCE943AF9AB02D7E8EE2FE40"><enum>(7)</enum><text>The item relating
to section 1375 in the table of sections for part III of subchapter S of
chapter 1 is amended by striking <quote>25 percent</quote> and inserting
<quote>60 percent</quote>.</text>
</paragraph></subsection><subsection id="idD82A2945C054474BA9C348F13BEDA718"><enum>(d)</enum><header>Effective
date</header><text>The amendments made by this section shall apply to taxable
years beginning after December 31, 2005.</text>
</subsection></section><section id="idF6067DAD9496473B851AE91A09B0904F"><enum>403.</enum><header>Modification
of effective date of disregard of certain capital expenditures for purposes of
qualified small issue bonds</header>
<subsection id="id48A61D34415A43B4815ECFF4EDF021E9"><enum>(a)</enum><header>In
general</header><text>Section 144(a)(4)(G) is amended by striking
<quote>September 30, 2009</quote> and inserting <quote>December 31,
2006</quote>.</text>
</subsection><subsection commented="no" display-inline="no-display-inline" id="id2560030D59994C828288FA24524B5A2A"><enum>(b)</enum><header>Conforming
amendment</header><text>Section 144(a)(4)(F) is amended by striking
<quote>September 30, 2009</quote> and inserting <quote>December 31,
2006</quote>.</text>
</subsection></section><section id="IDFB612B9CBF5F41AD9F249874E602312B"><enum>404.</enum><header>Premiums for
mortgage insurance</header>
<subsection id="IDCC739374A9AD4A5CAE00782E89FF3C7B"><enum>(a)</enum><header>In
general</header><text>Section 163(h)(3) (relating to qualified residence
interest) is amended by adding at the end the following new
subparagraph:</text>
<quoted-block id="ID8486DB06D5F14249835100F28752BF82">
<subparagraph id="IDDBF7070211FB419BA2178149A0387337"><enum>(E)</enum><header>Mortgage
insurance premiums treated as interest</header>
<clause id="ID601F77B8754640559FAE9D0068641BE7"><enum>(i)</enum><header>In
general</header><text>Premiums paid or accrued for qualified mortgage insurance
by a taxpayer during the taxable year in connection with acquisition
indebtedness with respect to a qualified residence of the taxpayer shall be
treated for purposes of this section as interest which is qualified residence
interest.</text>
</clause><clause id="IDE5E1CBDD977C4042AAA6D37FF6AB287B"><enum>(ii)</enum><header>Phaseout</header><text>The
amount otherwise treated as interest under clause (i) shall be reduced (but not
below zero) by 10 percent of such amount for each $1,000 ($500 in the case of a
married individual filing a separate return) (or fraction thereof) that the
taxpayer’s adjusted gross income for the taxable year exceeds $100,000 ($50,000
in the case of a married individual filing a separate
return).</text>
</clause></subparagraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="ID575CEB37EBB945FC8283EBBD22E9351C"><enum>(b)</enum><header>Definition and
special rules</header><text>Section 163(h)(4) (relating to other definitions
and special rules) is amended by adding at the end the following new
subparagraphs:</text>
<quoted-block id="IDA0522689BD8C4BBE9432825D4E3F9935">
<subparagraph id="IDCA13CCD67B11447F88DD0384F2661979"><enum>(E)</enum><header>Qualified
mortgage insurance</header><text>The term <term>qualified mortgage
insurance</term> means—</text>
<clause id="IDC0DE5A1072D64189A73FE2E3DA94CEA1"><enum>(i)</enum><text>mortgage
insurance provided by the Veterans Administration, the Federal Housing
Administration, or the Rural Housing Administration, and</text>
</clause><clause id="IDDF7B34DDCB8440AE952FBB0094A51CBC"><enum>(ii)</enum><text>private mortgage
insurance (as defined by section 2 of the Homeowners Protection Act of 1998
(<external-xref legal-doc="usc" parsable-cite="usc/12/4901">12 U.S.C.
4901</external-xref>), as in effect on the date of the enactment of this
subparagraph).</text>
</clause></subparagraph><subparagraph id="ID4CC37659A72B4C2CA0ED2D15F75D895D"><enum>(F)</enum><header>Special rules
for prepaid qualified mortgage insurance</header><text>Any amount paid by the
taxpayer for qualified mortgage insurance that is properly allocable to any
mortgage the payment of which extends to periods that are after the close of
the taxable year in which such amount is paid shall be chargeable to capital
account and shall be treated as paid in such periods to which so allocated. No
deduction shall be allowed for the unamortized balance of such account if such
mortgage is satisfied before the end of its term. The preceding sentences shall
not apply to amounts paid for qualified mortgage insurance provided by the
Veterans Administration or the Rural Housing
Administration.</text>
</subparagraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="ID5D8020D51B9A4AE38E8CD2B534EBE3FC"><enum>(c)</enum><header>Information
returns relating to mortgage insurance</header><text display-inline="yes-display-inline">Section 6050H (relating to returns relating
to mortgage interest received in trade or business from individuals) is amended
by adding at the end the following new subsection:</text>
<quoted-block id="ID1C9CAE55C79149730009E4ED2C8FB751">
<subsection id="IDE0F5432CDA9647B5AD66CC37EFDF8FB2"><enum>(h)</enum><header>Returns
relating to mortgage insurance premiums</header>
<paragraph id="ID0C3F7E91C2C148D997DBE2158C902C04"><enum>(1)</enum><header>In
general</header><text>The Secretary may prescribe, by regulations, that any
person who, in the course of a trade or business, receives from any individual
premiums for mortgage insurance aggregating $600 or more for any calendar year,
shall make a return with respect to each such individual. Such return shall be
in such form, shall be made at such time, and shall contain such information as
the Secretary may prescribe.</text>
</paragraph><paragraph id="IDA993DBBABF594C918D5E42E517051CFA"><enum>(2)</enum><header>Statement to be
furnished to individuals with respect to whom information is
required</header><text>Every person required to make a return under paragraph
(1) shall furnish to each individual with respect to whom a return is made a
written statement showing such information as the Secretary may prescribe. Such
written statement shall be furnished on or before January 31 of the year
following the calendar year for which the return under paragraph (1) was
required to be made.</text>
</paragraph><paragraph id="ID2A26DF565F224DE5BCEF00D400AC001F"><enum>(3)</enum><header>Special
rules</header><text>For purposes of this subsection—</text>
<subparagraph id="IDA96D040A86A84AA6A24F66C2E4D5F894"><enum>(A)</enum><text>rules similar to
the rules of subsection (c) shall apply, and</text>
</subparagraph><subparagraph id="ID9D3769BFE4264F89A1945183930902D9"><enum>(B)</enum><text>the term
<term>mortgage insurance</term> means—</text>
<clause id="ID0B2FF98E4DA44A929BC8DF7E2FD11033"><enum>(i)</enum><text>mortgage
insurance provided by the Veterans Administration, the Federal Housing
Administration, or the Rural Housing Administration, and</text>
</clause><clause id="ID64957C0D17BF438A9B8ED2BAB79990EF"><enum>(ii)</enum><text>private mortgage
insurance (as defined by section 2 of the Homeowners Protection Act of 1998
(<external-xref legal-doc="usc" parsable-cite="usc/12/4901">12 U.S.C.
4901</external-xref>), as in effect on the date of the enactment of this
subsection).</text>
</clause></subparagraph></paragraph></subsection><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection commented="no" display-inline="no-display-inline" id="ID0FBA52AFAB604F6881E130900493AA28"><enum>(d)</enum><header>Effective
date</header><text display-inline="yes-display-inline">The amendments made by
this section shall apply to amounts paid or accrued during the period beginning
after December 31, 2006, and before January 1, 2008, and properly allocable to
such period, with respect to mortgage insurance contracts issued after December
31, 2006.</text>
</subsection></section><enum>V</enum><header>Revenue offset
provisions</header>
<subtitle id="id3926B0968FE147F0BBD1F4909C3BE02C"><enum>A</enum><header>Provisions
designed to curtail tax shelters</header>
<section id="ID3BFD2950D14847C5B4E1341E81EBB71F"><enum>501.</enum><header>Understatement
of taxpayer’s liability by income tax return preparer</header>
<subsection id="IDFE482A0BCD59476A877C4C5DF017186A"><enum>(a)</enum><header>Standards
conformed to taxpayer standards</header><text>Section 6694(a) (relating to
understatements due to unrealistic positions) is amended—</text>
<paragraph id="ID9268F9D9676543F0982183314439C5C4"><enum>(1)</enum><text>by striking
<quote>realistic possibility of being sustained on its merits</quote> in
paragraph (1) and inserting <quote>reasonable belief that the tax treatment in
such position was more likely than not the proper treatment</quote>,</text>
</paragraph><paragraph id="ID5C645CD88DAF4AAF8E26276831D22C60"><enum>(2)</enum><text>by striking
<quote>or was frivolous</quote> in paragraph (3) and inserting <quote>or there
was no reasonable basis for the tax treatment of such position</quote>,
and</text>
</paragraph><paragraph id="ID52D401A883B344A195CB7CCE23CBA9E8"><enum>(3)</enum><text>by striking
<quote><header-in-text>Unrealistic</header-in-text></quote> in the heading and
inserting <quote><header-in-text>Improper</header-in-text></quote>.</text>
</paragraph></subsection><subsection id="IDFDEBAC65BA4D4ABAA8D1E9751E3D59DC"><enum>(b)</enum><header>Amount of
penalty</header><text>Section 6694 is amended—</text>
<paragraph id="IDDF7BACEBFEB84C90AA3FC79C045EBF51"><enum>(1)</enum><text>by striking
<quote>$250</quote> in subsection (a) and inserting <quote>$1,000</quote>,
and</text>
</paragraph><paragraph id="ID6C3E575C6ECC4D73919D019DD5465980"><enum>(2)</enum><text>by striking
<quote>$1,000</quote> in subsection (b) and inserting
<quote>$5,000</quote>.</text>
</paragraph></subsection><subsection id="ID8E1F3E8434A94BE18536331D8BA669A5"><enum>(c)</enum><header>Effective
date</header><text>The amendments made by this section shall apply to documents
prepared after the date of the enactment of this Act.</text>
</subsection></section><section commented="no" display-inline="no-display-inline" id="idF58CB192D0474AC0898EB808EB0133D7" section-type="subsequent-section"><enum>502.</enum><header>Modifications of
suspension of interest and penalties where Internal Revenue Service fails to
contact taxpayer</header>
<subsection commented="no" display-inline="no-display-inline" id="id146F0763CDE341E7ADBD2C816FF6BA04"><enum>(a)</enum><header>Effective date
of exception from suspension rules for certain listed and reportable
transactions</header>
<paragraph commented="no" display-inline="no-display-inline" id="IDD6AE1382ED154285A50C270178AFFF9F"><enum>(1)</enum><header>In
general</header><text display-inline="yes-display-inline">Paragraph (2) of
section 903(d) of the American Jobs Creation Act of 2004 is amended to read as
follows:</text>
<quoted-block display-inline="no-display-inline" id="ID61B265694A77499BA61BBAE973BB444A" style="OLC">
<paragraph commented="no" display-inline="no-display-inline" id="IDB08CE6CD03D446119637E380AFBB676E"><enum>(2)</enum><header>Exception for
reportable or listed transactions</header>
<subparagraph commented="no" display-inline="no-display-inline" id="ID2C96DA8D089E450CAB69CC90948CD7CA"><enum>(A)</enum><header>In
general</header><text display-inline="yes-display-inline">The amendments made
by subsection (c) shall apply with respect to interest accruing after October
3, 2004.</text>
</subparagraph><subparagraph commented="no" display-inline="no-display-inline" id="ID17D1BA296AED45C89254BCD13577B1F2"><enum>(B)</enum><header>Special rule
for certain listed and reportable transactions</header>
<clause commented="no" display-inline="no-display-inline" id="IDBECAED16E7E14191ABFBA1E448E67307"><enum>(i)</enum><header>In
general</header><text display-inline="yes-display-inline">Except as provided in
clause (ii) or (iii), the amendments made by subsection (c) shall also apply
with respect to interest accruing on or before October 3, 2004.</text>
</clause><clause commented="no" display-inline="no-display-inline" id="ID79E8D4198D774EE98488F17B54326874"><enum>(ii)</enum><header>Participants
in settlement initiatives</header><text display-inline="yes-display-inline">Clause (i) shall not apply to any
transaction if, pursuant to a published settlement initiative which is offered
by the Secretary of the Treasury to a group of similarly situated taxpayers
claiming benefits from the transaction, the taxpayer has entered into a
settlement agreement with respect to the tax liability arising in connection
with the transaction.</text>
</clause><clause commented="no" display-inline="no-display-inline" id="ID8983414BDA31462E8BAB6E6FB7D2227D"><enum>(iii)</enum><header>Closed
transactions</header><text display-inline="yes-display-inline">Clause (i) shall
not apply to a transaction if, as of July 29, 2005 (May 9, 2005 in the case of
a listed transaction)—</text>
<subclause commented="no" display-inline="no-display-inline" id="ID92C7AC84791C4EF089C512F45991E710"><enum>(I)</enum><text display-inline="yes-display-inline">the assessment of all Federal income taxes
for the taxable year in which the tax liability to which the interest relates
arose is prevented by the operation of any law or rule of law, or</text>
</subclause><subclause commented="no" display-inline="no-display-inline" id="ID3F3B2FBE65C344EB878B8E6E6E4F90A7"><enum>(II)</enum><text display-inline="yes-display-inline">a closing agreement under section 7121 has
been entered into with respect to the tax liability arising in connection with
the
transaction.</text>
</subclause></clause></subparagraph></paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph><paragraph commented="no" display-inline="no-display-inline" id="ID2070E0C5EAB14A2EA43444D597BB80F0"><enum>(2)</enum><header>Effective
date</header><text display-inline="yes-display-inline">The amendment made by
this subsection shall take effect as if included in the provisions of the
American Jobs Creation Act of 2004 to which it relates.</text>
</paragraph></subsection><subsection commented="no" display-inline="no-display-inline" id="id8F5B0AF4FD1E4AD4B916D489DE1A21CF"><enum>(b)</enum><header>Treatment of
amended returns and other similar notices of additional tax owed</header>
<paragraph commented="no" display-inline="no-display-inline" id="id2390290B4D094557A5EB185C46651DD6"><enum>(1)</enum><header>In
general</header><text display-inline="yes-display-inline">Section 6404(g)(1)
(relating to suspension) is amended by adding at the end the following new
sentence: <quote>If, after the return for a taxable year is filed, the taxpayer
provides to the Secretary 1 or more signed written documents showing that the
taxpayer owes an additional amount of tax for the taxable year, clause (i)
shall be applied by substituting the date the last of the documents was
provided for the date on which the return is filed.</quote></text>
</paragraph><paragraph commented="no" display-inline="no-display-inline" id="id7DC9634B2EA340159A4D74ABFFD09A75"><enum>(2)</enum><header>Effective
date</header><text display-inline="yes-display-inline">The amendment made by
this subsection shall apply to documents provided on or after July 29,
2005.</text>
</paragraph></subsection></section><section id="IDAD5CA1C27195438FBE7AD81D256E64F7"><enum>503.</enum><header>Frivolous tax
submissions</header>
<subsection id="ID50A99695489B44DB96D5D62B8C103443"><enum>(a)</enum><header>Civil
penalties</header><text>Section 6702 is amended to read as follows:</text>
<quoted-block id="ID22E35C2587864B0E9ED8AD31ED164CFD" style="OLC">
<section id="IDAC7DABA2E4394E9DAB01C60D7875F868"><enum>6702.</enum><header>Frivolous tax
submissions</header>
<subsection id="ID12757642BE1A46589F4865B45A2BDAA5"><enum>(a)</enum><header>Civil penalty
for frivolous tax returns</header><text>A person shall pay a penalty of $5,000
if—</text>
<paragraph id="IDE001206C72D44079A3927102CCDA4A2C"><enum>(1)</enum><text>such person files
what purports to be a return of a tax imposed by this title but which—</text>
<subparagraph id="IDCDDEB1BF932D45EFA8D721D602488128"><enum>(A)</enum><text>does not contain
information on which the substantial correctness of the self-assessment may be
judged, or</text>
</subparagraph><subparagraph id="IDD67E3AFD33DA43D2B2D1365A48AD7356"><enum>(B)</enum><text>contains
information that on its face indicates that the self-assessment is
substantially incorrect; and</text>
</subparagraph></paragraph><paragraph id="ID7282D487A68647809EE45DA587355270"><enum>(2)</enum><text>the conduct
referred to in paragraph (1)—</text>
<subparagraph id="ID8A6E4DF5DA5C45F997E13E9CA14A56E1"><enum>(A)</enum><text>is based on a
position which the Secretary has identified as frivolous under subsection (c),
or</text>
</subparagraph><subparagraph id="ID24799A79112149B1960B788B497BF4B5"><enum>(B)</enum><text>reflects a desire
to delay or impede the administration of Federal tax laws.</text>
</subparagraph></paragraph></subsection><subsection id="IDEE46D053396E4276970A359DE70DD627"><enum>(b)</enum><header>Civil penalty
for specified frivolous submissions</header>
<paragraph id="IDCEAB11D27908409D8C8848D109656091"><enum>(1)</enum><header>Imposition of
penalty</header><text>Except as provided in paragraph (3), any person who
submits a specified frivolous submission shall pay a penalty of $5,000.</text>
</paragraph><paragraph id="IDBA29D296CFB245269A1116FD684BA479"><enum>(2)</enum><header>Specified
frivolous submission</header><text>For purposes of this section—</text>
<subparagraph id="IDA8AA33884DB04B28B4ABE097979E4E98"><enum>(A)</enum><header>Specified
frivolous submission</header><text>The term <term>specified frivolous
submission</term> means a specified submission if any portion of such
submission—</text>
<clause id="ID1BBE640B6A2847E9803DC46B435A8571"><enum>(i)</enum><text>is based on a
position which the Secretary has identified as frivolous under subsection (c),
or</text>
</clause><clause id="IDBA51B8FA19BB4850AA95FD131383DDCD"><enum>(ii)</enum><text>reflects a
desire to delay or impede the administration of Federal tax laws.</text>
</clause></subparagraph><subparagraph id="IDC4A33064BD504F0FA89C763CE97CD852"><enum>(B)</enum><header>Specified
submission</header><text>The term <term>specified submission</term>
means—</text>
<clause id="IDABD02C97E24047709F8812268C39F03D"><enum>(i)</enum><text>a
request for a hearing under—</text>
<subclause id="IDF5D3AF441A7A492A997A33BDC7587EE0"><enum>(I)</enum><text>section 6320
(relating to notice and opportunity for hearing upon filing of notice of lien),
or</text>
</subclause><subclause id="ID428706A00ED740958E291C6636E4217D"><enum>(II)</enum><text>section 6330
(relating to notice and opportunity for hearing before levy), and</text>
</subclause></clause><clause id="ID32BA238071FD44A89F9CBD9940F4BBE1"><enum>(ii)</enum><text>an application
under—</text>
<subclause id="ID56052C1955F4493ABF9638D5EBDB6962"><enum>(I)</enum><text>section 6159
(relating to agreements for payment of tax liability in installments),</text>
</subclause><subclause id="IDA891220125AD4005A61411EE91BAE7C2"><enum>(II)</enum><text>section 7122
(relating to compromises), or</text>
</subclause><subclause id="ID63574B1D4E204F73B77D3059B7B39935"><enum>(III)</enum><text>section 7811
(relating to taxpayer assistance orders).</text>
</subclause></clause></subparagraph></paragraph><paragraph id="ID35A5DEEBFF4B48DCAC8BF91998A0E3E6"><enum>(3)</enum><header>Opportunity to
withdraw submission</header><text>If the Secretary provides a person with
notice that a submission is a specified frivolous submission and such person
withdraws such submission within 30 days after such notice, the penalty imposed
under paragraph (1) shall not apply with respect to such submission.</text>
</paragraph></subsection><subsection id="ID0608EFDE7A5E4DC08FB1268AEDD80FD6"><enum>(c)</enum><header>Listing of
frivolous positions</header><text>The Secretary shall prescribe (and
periodically revise) a list of positions which the Secretary has identified as
being frivolous for purposes of this subsection. The Secretary shall not
include in such list any position that the Secretary determines meets the
requirement of section 6662(d)(2)(B)(ii)(II).</text>
</subsection><subsection id="ID243FD1D20C1D40BFA644C150629D0130"><enum>(d)</enum><header>Reduction of
penalty</header><text>The Secretary may reduce the amount of any penalty
imposed under this section if the Secretary determines that such reduction
would promote compliance with and administration of the Federal tax
laws.</text>
</subsection><subsection id="ID6DEC0DE187B043619A11745E79155C7C"><enum>(e)</enum><header>Penalties in
addition to other penalties</header><text>The penalties imposed by this section
shall be in addition to any other penalty provided by
law.</text>
</subsection></section><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="ID49ABD5030C024FC3B2F50CC681F0B5EF"><enum>(b)</enum><header>Treatment of
frivolous requests for hearings before levy</header>
<paragraph id="ID19411393AE464FBB9A731ABB860B6431"><enum>(1)</enum><header>Frivolous
requests disregarded</header><text>Section 6330 (relating to notice and
opportunity for hearing before levy) is amended by adding at the end the
following new subsection:</text>
<quoted-block id="ID7678B3C624B848B99E16680290F1D936" style="OLC">
<subsection id="IDAC1DECADF852472DB90AF530C84303FC"><enum>(g)</enum><header>Frivolous
requests for hearing, etc</header><text>Notwithstanding any other provision of
this section, if the Secretary determines that any portion of a request for a
hearing under this section or section 6320 meets the requirement of clause (i)
or (ii) of section 6702(b)(2)(A), then the Secretary may treat such portion as
if it were never submitted and such portion shall not be subject to any further
administrative or judicial
review.</text>
</subsection><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph><paragraph id="ID2F0EB54BE1C247DDB26C596748232185"><enum>(2)</enum><header>Preclusion from
raising frivolous issues at hearing</header><text>Section 6330(c)(4) is
amended—</text>
<subparagraph id="IDDB60A0E2E1AF421B9C4A517224A244EC"><enum>(A)</enum><text>by striking
<quote>(A)</quote> and inserting <quote>(A)(i)</quote>;</text>
</subparagraph><subparagraph id="ID70FED01070F5452FA461BE2432EBCE62"><enum>(B)</enum><text>by striking
<quote>(B)</quote> and inserting <quote>(ii)</quote>;</text>
</subparagraph><subparagraph id="IDFA6FF7298F2946E2935C4C992873F5A2"><enum>(C)</enum><text>by striking the
period at the end of the first sentence and inserting <quote>; or</quote>;
and</text>
</subparagraph><subparagraph id="ID931E2803BB434A1BB7230FFFA9EF482A"><enum>(D)</enum><text>by inserting
after subparagraph (A)(ii) (as so redesignated) the following:</text>
<quoted-block id="IDCF01288186234EB284E0EF8F831868F9" style="OLC">
<subparagraph id="IDCDBCDF18D63B4DDD95958BA5E79ED8B9"><enum>(B)</enum><text>the issue meets
the requirement of clause (i) or (ii) of section
6702(b)(2)(A).</text>
</subparagraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subparagraph></paragraph><paragraph id="IDC51B312E809F49E1968ECFCF4E56CC13"><enum>(3)</enum><header>Statement of
grounds</header><text>Section 6330(b)(1) is amended by striking <quote>under
subsection (a)(3)(B)</quote> and inserting <quote>in writing under subsection
(a)(3)(B) and states the grounds for the requested hearing</quote>.</text>
</paragraph></subsection><subsection id="ID17C9B565BA264A3D8D8AA1D760AD0489"><enum>(c)</enum><header>Treatment of
frivolous requests for hearings upon filing of notice of
lien</header><text>Section 6320 is amended—</text>
<paragraph id="IDDC4712E0C7954D51BD20788687B098BD"><enum>(1)</enum><text>in subsection
(b)(1), by striking <quote>under subsection (a)(3)(B)</quote> and inserting
<quote>in writing under subsection (a)(3)(B) and states the grounds for the
requested hearing</quote>, and</text>
</paragraph><paragraph id="ID7B2A79EA3C834635AC6F00AC8DA8A0E4"><enum>(2)</enum><text>in subsection
(c), by striking <quote>and (e)</quote> and inserting <quote>(e), and
(g)</quote>.</text>
</paragraph></subsection><subsection id="IDB5D362BCFE134384AD04C2C51AAF993A"><enum>(d)</enum><header>Treatment of
frivolous applications for offers-in-compromise and installment
agreements</header><text>Section 7122 is amended by adding at the end the
following new subsection:</text>
<quoted-block id="IDF290A7AB4EC3438D965232B437ED9169" style="OLC">
<subsection id="IDD455FEC28DC64BD69C1D45A58276F8D8"><enum>(e)</enum><header>Frivolous
submissions, etc</header><text>Notwithstanding any other provision of this
section, if the Secretary determines that any portion of an application for an
offer-in-compromise or installment agreement submitted under this section or
section 6159 meets the requirement of clause (i) or (ii) of section
6702(b)(2)(A), then the Secretary may treat such portion as if it were never
submitted and such portion shall not be subject to any further administrative
or judicial
review.</text>
</subsection><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="IDC2856766EC634E69B2F6B0B9418CD0F0"><enum>(e)</enum><header>Clerical
amendment</header><text>The table of sections for part I of subchapter B of
chapter 68 is amended by striking the item relating to section 6702 and
inserting the following new item:</text>
<quoted-block id="ID8257E3EC3DC8414BA6B4B09BC1680655" style="OLC">
<toc regeneration="no-regeneration">
<toc-entry level="section">Sec. 6702. Frivolous tax
submissions.</toc-entry>
</toc>
<after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection commented="no" display-inline="no-display-inline" id="IDE6B3B0E8BB4E4760B18D949D7B8917FF"><enum>(f)</enum><header>Effective
date</header><text>The amendments made by this section shall apply to
submissions made and issues raised after the date on which the Secretary first
prescribes a list under section 6702(c) of the Internal Revenue Code of 1986,
as amended by subsection (a).</text>
</subsection></section></subtitle><subtitle id="ID21059C5B809F46C9870722F2DF2A52AF"><enum>B</enum><header>Economic
substance doctrine</header>
<section id="ID53F87CF0165246CE951F44F27DF1802F"><enum>511.</enum><header>Clarification
of economic substance doctrine</header>
<subsection id="ID3D16FE5DA076484187D54955824A3C6D"><enum>(a)</enum><header>In
general</header><text>Section 7701 is amended by redesignating subsection (o)
as subsection (p) and by inserting after subsection (n) the following new
subsection:</text>
<quoted-block id="ID2ED84DAE98244F548EF72388BF94E5A8" style="OLC">
<subsection id="IDD5EB640D83534691A75B86238D5754C2"><enum>(o)</enum><header>Clarification
of economic substance doctrine; etc</header>
<paragraph id="ID8FC902AB4DC84812A055FBE54D576190"><enum>(1)</enum><header>General
rules</header>
<subparagraph id="ID3573E96846674F8588BB428CC17202A6"><enum>(A)</enum><header>In
general</header><text>In any case in which a court determines that the economic
substance doctrine is relevant for purposes of this title to a transaction (or
series of transactions), such transaction (or series of transactions) shall
have economic substance only if the requirements of this paragraph are
met.</text>
</subparagraph><subparagraph id="IDC294BB132B044212915A5225F52C254F"><enum>(B)</enum><header>Definition of
economic substance</header><text>For purposes of subparagraph (A)—</text>
<clause id="IDC8EC4086778C40D4B7589D59B5085621"><enum>(i)</enum><header>In
general</header><text>A transaction has economic substance only if—</text>
<subclause id="IDB9CDF6953B854302A52D41076184F6EE"><enum>(I)</enum><text>the transaction
changes in a meaningful way (apart from Federal tax effects) the taxpayer’s
economic position, and</text>
</subclause><subclause id="ID2F2BAE90C2CD4A2287361BB1A2D24767"><enum>(II)</enum><text>the taxpayer has
a substantial nontax purpose for entering into such transaction and the
transaction is a reasonable means of accomplishing such purpose.</text>
</subclause><continuation-text continuation-text-level="clause">In applying
subclause (II), a purpose of achieving a financial accounting benefit shall not
be taken into account in determining whether a transaction has a substantial
nontax purpose if the origin of such financial accounting benefit is a
reduction of income tax.</continuation-text></clause><clause id="ID88D935D1B8C6413E9811992F6C61BA4E"><enum>(ii)</enum><header>Special rule
where taxpayer relies on profit potential</header><text>A transaction shall not
be treated as having economic substance by reason of having a potential for
profit unless—</text>
<subclause id="ID670C03B1646D4FA791AB082695B32D49"><enum>(I)</enum><text>the present value
of the reasonably expected pre-tax profit from the transaction is substantial
in relation to the present value of the expected net tax benefits that would be
allowed if the transaction were respected, and</text>
</subclause><subclause id="ID07D304B633694E8A9202D9A49E92888D"><enum>(II)</enum><text>the reasonably
expected pre-tax profit from the transaction exceeds a risk-free rate of
return.</text>
</subclause></clause></subparagraph><subparagraph id="IDACC1E45FFE9B4831886E12B6E27C002A"><enum>(C)</enum><header>Treatment of
fees and foreign taxes</header><text>Fees and other transaction expenses and
foreign taxes shall be taken into account as expenses in determining pre-tax
profit under subparagraph (B)(ii).</text>
</subparagraph></paragraph><paragraph id="IDEAC2E2EB5E274B0DA3A2847841CA4696"><enum>(2)</enum><header>Special rules
for transactions with tax-indifferent parties</header>
<subparagraph id="IDC78BB1DAA8DE4BEE9EC9FABAB70FC738"><enum>(A)</enum><header>Special rules
for financing transactions</header><text>The form of a transaction which is in
substance the borrowing of money or the acquisition of financial capital
directly or indirectly from a tax-indifferent party shall not be respected if
the present value of the deductions to be claimed with respect to the
transaction is substantially in excess of the present value of the anticipated
economic returns of the person lending the money or providing the financial
capital. A public offering shall be treated as a borrowing, or an acquisition
of financial capital, from a tax-indifferent party if it is reasonably expected
that at least 50 percent of the offering will be placed with tax-indifferent
parties.</text>
</subparagraph><subparagraph id="ID57C4630C938B408B99D408C4B0DD6FCD"><enum>(B)</enum><header>Artificial
income shifting and basis adjustments</header><text>The form of a transaction
with a tax-indifferent party shall not be respected if—</text>
<clause id="IDB5FD7DDB602F492992D3EF3AE9A2FF40"><enum>(i)</enum><text>it results in an
allocation of income or gain to the tax-indifferent party in excess of such
party’s economic income or gain, or</text>
</clause><clause id="ID107BD6B5ECFD4ACC90AE4FBB19DB203B"><enum>(ii)</enum><text>it results in a
basis adjustment or shifting of basis on account of overstating the income or
gain of the tax-indifferent party.</text>
</clause></subparagraph></paragraph><paragraph id="ID5F073B31045E497F8F1248A300D251BA"><enum>(3)</enum><header>Definitions and
special rules</header><text>For purposes of this subsection—</text>
<subparagraph id="IDC9DC99FDC907477EBE4670708B584CF0"><enum>(A)</enum><header>Economic
substance doctrine</header><text>The term <term>economic substance
doctrine</term> means the common law doctrine under which tax benefits under
subtitle A with respect to a transaction are not allowable if the transaction
does not have economic substance or lacks a business purpose.</text>
</subparagraph><subparagraph id="ID2386E16A8D1D43DC9A0D5729F891039C"><enum>(B)</enum><header>Tax-indifferent
party</header><text>The term <term>tax-indifferent party</term> means any
person or entity not subject to tax imposed by subtitle A. A person shall be
treated as a tax-indifferent party with respect to a transaction if the items
taken into account with respect to the transaction have no substantial impact
on such person’s liability under subtitle A.</text>
</subparagraph><subparagraph id="ID0EDEFA3FAAC24F3CA589031CFA2031DE"><enum>(C)</enum><header>Exception for
personal transactions of individuals</header><text>In the case of an
individual, this subsection shall apply only to transactions entered into in
connection with a trade or business or an activity engaged in for the
production of income.</text>
</subparagraph><subparagraph id="IDDA56F5758B604964BE4EEF422A9B12CE"><enum>(D)</enum><header>Treatment of
lessors</header><text>In applying paragraph (1)(B)(ii) to the lessor of
tangible property subject to a lease—</text>
<clause id="IDE04201153D51435EA4A20AD246379E2E"><enum>(i)</enum><text>the expected net
tax benefits with respect to the leased property shall not include the benefits
of—</text>
<subclause id="ID6440CC1EC13346709A1559A83C1ADDFD"><enum>(I)</enum><text>depreciation,</text>
</subclause><subclause id="ID98B81640CC724531899D1A519BC8169C"><enum>(II)</enum><text>any tax credit,
or</text>
</subclause><subclause id="IDFE167AD4AB2F4C35AEB33ADE5BF9518B"><enum>(III)</enum><text>any other
deduction as provided in guidance by the Secretary, and</text>
</subclause></clause><clause id="IDD4C01644F5DD4F15BCCBF984C2653E3C"><enum>(ii)</enum><text>subclause (II)
of paragraph (1)(B)(ii) shall be disregarded in determining whether any of such
benefits are allowable.</text>
</clause></subparagraph></paragraph><paragraph id="ID96D2E02074414B739214B4E229B096E5"><enum>(4)</enum><header>Other common
law doctrines not affected</header><text>Except as specifically provided in
this subsection, the provisions of this subsection shall not be construed as
altering or supplanting any other rule of law, and the requirements of this
subsection shall be construed as being in addition to any such other rule of
law.</text>
</paragraph><paragraph id="ID6E678872C1F34054B4906F98967CBCBF"><enum>(5)</enum><header>Regulations</header><text>The
Secretary shall prescribe such regulations as may be necessary or appropriate
to carry out the purposes of this subsection. Such regulations may include
exemptions from the application of this
subsection.</text>
</paragraph></subsection><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="IDAA335B4CEDB74921ADA60EDC55F25585"><enum>(b)</enum><header>Effective
date</header><text>The amendments made by this section shall apply to
transactions entered into after the date of the enactment of this Act.</text>
</subsection></section><section id="ID6678AC678E7342CCA387FB5944EAF4BD"><enum>512.</enum><header>Penalty for
understatements attributable to transactions lacking economic substance,
etc</header>
<subsection id="ID9B282C2077C84CA590869508DBC7DBA0"><enum>(a)</enum><header>In
general</header><text>Subchapter A of chapter 68 is amended by inserting after
section 6662A the following new section:</text>
<quoted-block id="ID1ADF05C68FCE4678B40801B681A0C559" style="OLC">
<section id="ID6F3ED9CE0CE646E6B5C82766A92EA745"><enum>6662B.</enum><header>Penalty for
understatements attributable to transactions lacking economic substance,
etc</header>
<subsection id="ID464AE129DED94B60A5D5B73C46B9F003"><enum>(a)</enum><header>Imposition of
penalty</header><text>If a taxpayer has an noneconomic substance transaction
understatement for any taxable year, there shall be added to the tax an amount
equal to 40 percent of the amount of such understatement.</text>
</subsection><subsection id="ID922C8149547148439F726F9818FEEDFB"><enum>(b)</enum><header>Reduction of
penalty for disclosed transactions</header><text>Subsection (a) shall be
applied by substituting <quote>20 percent</quote> for <quote>40 percent</quote>
with respect to the portion of any noneconomic substance transaction
understatement with respect to which the relevant facts affecting the tax
treatment of the item are adequately disclosed in the return or a statement
attached to the return.</text>
</subsection><subsection id="IDE530209B09D3442B8E3072F6CFF3955E"><enum>(c)</enum><header>Noneconomic
substance transaction understatement</header><text>For purposes of this
section—</text>
<paragraph id="ID98874B32397044559453C6FAC09E1E83"><enum>(1)</enum><header>In
general</header><text>The term <term>noneconomic substance transaction
understatement</term> means any amount which would be an understatement under
section 6662A(b)(1) if section 6662A were applied by taking into account items
attributable to noneconomic substance transactions rather than items to which
section 6662A would apply without regard to this paragraph.</text>
</paragraph><paragraph id="ID75977A0CC16644E6993F766C82EE6AC2"><enum>(2)</enum><header>Noneconomic
substance transaction</header><text>The term <term>noneconomic substance
transaction</term> means any transaction if—</text>
<subparagraph id="ID8C241968D5D142CB9BD916376308D930"><enum>(A)</enum><text>there is a lack
of economic substance (within the meaning of section 7701(o)(1)) for the
transaction giving rise to the claimed benefit or the transaction was not
respected under section 7701(o)(2), or</text>
</subparagraph><subparagraph id="ID41AA74B300C74BA89A43B60E39F8D09A"><enum>(B)</enum><text>the transaction
fails to meet the requirements of any similar rule of law.</text>
</subparagraph></paragraph></subsection><subsection id="ID7540A99296074E1DA02D63FAC93ED4F0"><enum>(d)</enum><header>Rules
applicable to compromise of penalty</header>
<paragraph id="IDA137EC0C40E949E1B242A7729D660461"><enum>(1)</enum><header>In
general</header><text>If the 1st letter of proposed deficiency which allows the
taxpayer an opportunity for administrative review in the Internal Revenue
Service Office of Appeals has been sent with respect to a penalty to which this
section applies, only the Commissioner of Internal Revenue may compromise all
or any portion of such penalty.</text>
</paragraph><paragraph id="ID4B27246DDE1C4AED8EEB877CAFBA8A0E"><enum>(2)</enum><header>Applicable
rules</header><text>The rules of paragraphs (2) and (3) of section 6707A(d)
shall apply for purposes of paragraph (1).</text>
</paragraph></subsection><subsection id="IDFE09147A24A64172AC800E385E7F1BFB"><enum>(e)</enum><header>Coordination
with other penalties</header><text>Except as otherwise provided in this part,
the penalty imposed by this section shall be in addition to any other penalty
imposed by this title.</text>
</subsection><subsection id="IDD70F575B4A1A4893AE308F422E8D1126"><enum>(f)</enum><header>Cross
references</header>
<toc regeneration="no-regeneration">
<toc-entry level="paragraph">(1) For coordination of penalty with
understatements under section 6662 and other special rules, see section
6662A(e)</toc-entry>
<toc-entry level="paragraph">(2) For reporting of penalty imposed
under this section to the Securities and Exchange Commission, see section
6707A(e)</toc-entry>
</toc>
</subsection></section><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="ID8E6B578455C9459ABFB97E645D6CEF9D"><enum>(b)</enum><header>Coordination
with other understatements and penalties</header>
<paragraph id="IDE2672582D772408DBADFE45382ADA052"><enum>(1)</enum><text>The second
sentence of section 6662(d)(2)(A) is amended by inserting <quote>and without
regard to items with respect to which a penalty is imposed by section
6662B</quote> before the period at the end.</text>
</paragraph><paragraph id="ID4C1C5493DD894A6ABE515D9635AAE80C"><enum>(2)</enum><text>Subsection (e) of
section 6662A is amended—</text>
<subparagraph id="ID50CF2EB53C6444ECB161454764D1A5AF"><enum>(A)</enum><text>in paragraph (1),
by inserting <quote>and noneconomic substance transaction
understatements</quote> after <quote>reportable transaction
understatements</quote> both places it appears,</text>
</subparagraph><subparagraph id="ID9B9A77EF153B402D985FB4B54CA7FB4F"><enum>(B)</enum><text>in paragraph
(2)(A), by inserting <quote>and a noneconomic substance transaction
understatement</quote> after <quote>reportable transaction
understatement</quote>,</text>
</subparagraph><subparagraph id="IDA74832A6DC0749228C27E7FDA3244337"><enum>(C)</enum><text>in paragraph
(2)(B), by inserting <quote>6662B or</quote> before <quote>6663</quote>,</text>
</subparagraph><subparagraph id="IDE234F40B58E149BAB9F63DAB4A7A8BF8"><enum>(D)</enum><text>in paragraph
(2)(C)(i), by inserting <quote>or section 6662B</quote> before the period at
the end,</text>
</subparagraph><subparagraph id="ID47C25611AD1D47FD8E45E3C3A89D50FE"><enum>(E)</enum><text>in paragraph
(2)(C)(ii), by inserting <quote>and section 6662B</quote> after <quote>This
section</quote>,</text>
</subparagraph><subparagraph id="IDB04A98D3F122473A989D793B1478C049"><enum>(F)</enum><text>in paragraph (3),
by inserting <quote>or noneconomic substance transaction understatement</quote>
after <quote>reportable transaction understatement</quote>, and</text>
</subparagraph><subparagraph id="IDD7DD2D9D27C34C49B9B546B555A8B417"><enum>(G)</enum><text>by adding at the
end the following new paragraph:</text>
<quoted-block id="IDA2EEBA2545384212B3BD80604C09BA16" style="OLC">
<paragraph id="IDD9AF5E177F5C411FB75B392FFF50B435"><enum>(4)</enum><header>Noneconomic
substance transaction understatement</header><text>For purposes of this
subsection, the term <term>noneconomic substance transaction
understatement</term> has the meaning given such term by section
6662B(c).</text>
</paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subparagraph></paragraph><paragraph id="ID986E7D16E6764B9190AC1945AFA13E72"><enum>(3)</enum><text>Subsection (e) of
section 6707A is amended—</text>
<subparagraph id="ID01BE125332B149409991609001CA56A8"><enum>(A)</enum><text>by striking
<quote>or</quote> at the end of subparagraph (B), and</text>
</subparagraph><subparagraph id="IDEC5908B5B3BE4E4C83B5D541A256CA4E"><enum>(B)</enum><text>by striking
subparagraph (C) and inserting the following new subparagraphs:</text>
<quoted-block id="ID94BADAA60829484C956A415323237F7C" style="OLC">
<subparagraph id="ID880530A9E5D044EEAA868FB59BAE1D13"><enum>(C)</enum><text>is required to
pay a penalty under section 6662B with respect to any noneconomic substance
transaction, or</text>
</subparagraph><subparagraph id="ID4FB1F0496EB8416AA98DA388ED83D50F"><enum>(D)</enum><text>is required to
pay a penalty under section 6662(h) with respect to any transaction and would
(but for section 6662A(e)(2)(C)) have been subject to penalty under section
6662A at a rate prescribed under section 6662A(c) or under section
6662B,</text>
</subparagraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subparagraph></paragraph></subsection><subsection id="IDB0EDF9D7AC3F4B1D8528C66E4ADB9E41"><enum>(c)</enum><header>Clerical
amendment</header><text>The table of sections for part II of subchapter A of
chapter 68 is amended by inserting after the item relating to section 6662A the
following new item:</text>
<quoted-block id="IDF0D9FBD257CB4B5A8EB3B7B4ADA5C74E" style="OLC">
<toc regeneration="no-regeneration">
<toc-entry level="section">Sec. 6662B. Penalty for understatements
attributable to transactions lacking economic substance,
etc.</toc-entry>
</toc>
<after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="ID02EC5239321B460D963BDA867DBB6614"><enum>(d)</enum><header>Effective
date</header><text>The amendments made by this section shall apply to
transactions entered into after the date of the enactment of this Act.</text>
</subsection></section><section id="ID096FA684DB4F42549E392485ABC963BB"><enum>513.</enum><header>Denial of
deduction for interest on underpayments attributable to noneconomic substance
transactions</header>
<subsection id="IDD3AE3D6D9EE0422D887E6029926148DB"><enum>(a)</enum><header>In
general</header><text>Section 163(m) (relating to interest on unpaid taxes
attributable to nondisclosed reportable transactions) is amended—</text>
<paragraph id="IDC30F2E817FFD4988BCB0EAB671E86C70"><enum>(1)</enum><text>by striking
“attributable” and all that follows and inserting the following: “attributable
to—</text>
<quoted-block id="ID4CDBD7A03BD34B5D8D62F91F8AB94709" style="OLC">
<paragraph id="IDE0A6169D2D7141F3945A72B14115D3BC"><enum>(1)</enum><text>the portion of
any reportable transaction understatement (as defined in section 6662A(b)) with
respect to which the requirement of section 6664(d)(2)(A) is not met, or</text>
</paragraph><paragraph id="IDDA66E9CE64C44322BEBE354E75D97D76"><enum>(2)</enum><text>any noneconomic
substance transaction understatement (as defined in section
6662B(c)).</text>
</paragraph><after-quoted-block>,
and</after-quoted-block></quoted-block>
</paragraph><paragraph id="ID2BA34BBD47FD467681BBA265791FA75D"><enum>(2)</enum><text>by inserting
<quote><header-in-text level="subsection" style="OLC">and Noneconomic Substance
Transactions</header-in-text></quote> in the heading thereof after
<quote><header-in-text level="subsection" style="OLC">Transactions</header-in-text></quote>.</text>
</paragraph></subsection><subsection commented="no" display-inline="no-display-inline" id="IDF183C30489A84B0199E877761015F263"><enum>(b)</enum><header>Effective
date</header><text>The amendments made by this section shall apply to
transactions after the date of the enactment of this Act in taxable years
ending after such date.</text>
</subsection></section></subtitle><subtitle id="ID8CDEE713163147D1AB61CB58DA7774E8"><enum>C</enum><header>Improvements in
efficiency and safeguards in Internal Revenue Service collection</header>
<section id="ID405E4BE5F5A3406B89522E5F4C0932B3"><enum>521.</enum><header>Waiver of user
fee for installment agreements using automated withdrawals</header>
<subsection id="IDD664DA381748470AB5F55F810615E78A"><enum>(a)</enum><header>In
general</header><text>Section 6159 (relating to agreements for payment of tax
liability in installments) is amended by redesignating subsection (e) as
subsection (f) and by inserting after subsection (d) the following:</text>
<quoted-block id="ID48453356D168462F885C07C8E6E5DFA9" style="OLC">
<subsection id="ID7E783715E693499EABCF244801F782E1"><enum>(e)</enum><header>Waiver of user
fees for installment agreements using automated withdrawals</header><text>In
the case of a taxpayer who enters into an installment agreement in which
automated installment payments are agreed to, the Secretary shall waive the fee
(if any) for entering into the installment
agreement.</text>
</subsection><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="IDE8057B68CD5744F3AA9859A3074E2169"><enum>(b)</enum><header>Effective
date</header><text>The amendments made by this section shall apply to
agreements entered into on or after the date which is 180 days after the date
of the enactment of this Act.</text>
</subsection></section><section id="IDD3894B3153024CDDBCBBCB9DFBD8842A"><enum>522.</enum><header>Termination of
installment agreements</header>
<subsection id="ID5DBDE8E4CACF4532B0ECC77F1D0B8CC8"><enum>(a)</enum><header>In
general</header><text>Section 6159(b)(4) (relating to failure to pay an
installment or any other tax liability when due or to provide requested
financial information) is amended by striking <quote>or</quote> at the end of
subparagraph (B), by redesignating subparagraph (C) as subparagraph (E), and by
inserting after subparagraph (B) the following:</text>
<quoted-block id="IDED418742EE6E4583974C9406C54CF0E8" style="OLC">
<subparagraph id="IDB55C73F15F0944B698C6AD4A789BE9D0"><enum>(C)</enum><text>to make a Federal
tax deposit under section 6302 at the time such deposit is required to be
made,</text>
</subparagraph><subparagraph id="IDEA232BD537E8496B91A93C2D090DC1FF"><enum>(D)</enum><text>to file a return
of tax imposed under this title by its due date (including extensions),
or</text>
</subparagraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="IDE037063514CB4C78B6C09300F028764D"><enum>(b)</enum><header>Conforming
amendment</header><text>The heading for section 6159(b)(4) is amended by
striking <quote><header-in-text level="paragraph" style="OLC">Failure to pay an
installment or any other tax liability when due or to provide requested
financial information</header-in-text></quote> and inserting
<quote><header-in-text level="paragraph" style="OLC">Failure to make payments
or deposits or file returns when due or to provide requested financial
information</header-in-text></quote>.</text>
</subsection><subsection id="ID580A4D64A1D349E5941E244F8D616056"><enum>(c)</enum><header>Effective
date</header><text>The amendments made by this section shall apply to failures
occurring on or after the date of the enactment of this Act.</text>
</subsection></section><section id="ID4CBA49660DB6463E91948E15CF95F5FE"><enum>523.</enum><header>Partial
payments required with submission of offers-in-compromise</header>
<subsection id="IDE4687D1F48F049F28324FD6451B7A66C"><enum>(a)</enum><header>In
general</header><text>Section 7122 (relating to compromises), as amended by
this Act, is amended by redesignating subsections (c), (d), and (e) as
subsections (d), (e), and (f), respectively, and by inserting after subsection
(b) the following new subsection:</text>
<quoted-block id="IDCA1547B39F1A4DECB358371D96146DEF" style="OLC">
<subsection id="ID865CF7940F844A8E8908E5907A0EFAC2"><enum>(c)</enum><header>Rules for
submission of offers-in-compromise</header>
<paragraph id="ID0D075B792E0E4B2397E62CC055C021E9"><enum>(1)</enum><header>Partial payment
required with submission</header>
<subparagraph id="ID01067354E45843FEB06469ED20F786B0"><enum>(A)</enum><header>Lump-sum
offers</header>
<clause id="ID01E2E39E6973495F8BAB6DE034274C22"><enum>(i)</enum><header>In
general</header><text>The submission of any lump-sum offer-in-compromise shall
be accompanied by the payment of 20 percent of amount of such offer.</text>
</clause><clause id="ID9136926125A24E558F1A6A052050CDF8"><enum>(ii)</enum><header>Lump-sum
offer-in-compromise</header><text>For purposes of this section, the term
<term>lump-sum offer-in-compromise</term> means any offer of payments made in 5
or fewer installments.</text>
</clause></subparagraph><subparagraph id="IDA32D828D13364AC187031F22943E8E97"><enum>(B)</enum><header>Periodic
payment offers</header><text>The submission of any periodic payment
offer-in-compromise shall be accompanied by the payment of the amount of the
first proposed installment and each proposed installment due during the period
such offer is being evaluated for acceptance and has not been rejected by the
Secretary. Any failure to make a payment required under the preceding sentence
shall be deemed a withdrawal of the offer-in-compromise.</text>
</subparagraph></paragraph><paragraph id="ID1F56DDB1004042AD92C599D8240FA391"><enum>(2)</enum><header>Rules of
application</header>
<subparagraph id="IDDDB5BEC40DAB4CE79A3D796C44A883C9"><enum>(A)</enum><header>Use of
payment</header><text>The application of any payment made under this subsection
to the assessed tax or other amounts imposed under this title with respect to
such tax may be specified by the taxpayer.</text>
</subparagraph><subparagraph id="IDC3C1AC8D20934FCEA4E530D51D7F9316"><enum>(B)</enum><header>No user fee
imposed</header><text>Any user fee which would otherwise be imposed under this
section shall not be imposed on any offer-in-compromise accompanied by a
payment required under this subsection.</text>
</subparagraph><subparagraph id="idCEE70EC99D65498D9FF852CDFC519224"><enum>(C)</enum><header>Waiver
authority</header><text>The Secretary may issue regulations waiving any payment
required under paragraph (1) in a manner consistent with the practices
established in accordance with the requirements under subsection
(d)(3).</text>
</subparagraph></paragraph></subsection><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="ID10514513090D452DA2D5530256F47C21"><enum>(b)</enum><header>Additional
rules relating to treatment of offers</header>
<paragraph id="ID3644EC7E67E4442A9DB9C93DC839246C"><enum>(1)</enum><header>Unprocessable
offer if payment requirements are not met</header><text>Paragraph (3) of
section 7122(d) (relating to standards for evaluation of offers), as
redesignated by subsection (a), is amended by striking <quote>; and</quote> at
the end of subparagraph (A) and inserting a comma, by striking the period at
the end of subparagraph (B) and inserting <quote>, and</quote>, and by adding
at the end the following new subparagraph:</text>
<quoted-block id="IDFFA9D6B021494876A5EFD8CCB7440452" style="OLC">
<subparagraph id="ID70452A1BA4994FC385B6EC74DAF11D1B"><enum>(C)</enum><text>any
offer-in-compromise which does not meet the requirements of subsection (c)
shall be returned to the taxpayer as
unprocessable.</text>
</subparagraph><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph><paragraph id="ID7BD98E8BB5AA4A0C81B266A43D3089E9"><enum>(2)</enum><header>Deemed
acceptance of offer not rejected within certain period</header><text>Section
7122, as amended by subsection (a), is amended by adding at the end the
following new subsection:</text>
<quoted-block id="ID55F4F236FD894CB7B04FD1AF8A8F4886" style="OLC">
<subsection id="IDF6DD1A023C53425E8C8AC0C613F175F5"><enum>(g)</enum><header>Deemed
acceptance of offer not rejected within certain period</header><text>Any
offer-in-compromise submitted under this section shall be deemed to be accepted
by the Secretary if such offer is not rejected by the Secretary before the date
which is 24 months after the date of the submission of such offer (12 months
for offers-in-compromise submitted after the date which is 5 years after the
date of the enactment of this subsection). For purposes of the preceding
sentence, any period during which any tax liability which is the subject of
such offer-in-compromise is in dispute in any judicial proceeding shall not be
taken in to account in determining the expiration of the 24-month period (or
12-month period, if
applicable).</text>
</subsection><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph></subsection><subsection id="ID028C867D7DA64637B62BE8A93C76225A"><enum>(c)</enum><header>Effective
date</header><text>The amendments made by this section shall apply to
offers-in-compromise submitted on and after the date which is 60 days after the
date of the enactment of this Act.</text>
</subsection></section></subtitle><subtitle id="id56193AFAD9994C4F9A3E84CEBAA54BA5"><enum>D</enum><header>Penalties and
fines</header>
<section id="ID3F8CAFABC91448AC826799D6B48B7372"><enum>531.</enum><header>Increase in
criminal monetary penalty limitation for the underpayment or overpayment of tax
due to fraud</header>
<subsection id="IDECFC3562FC1E4D2EB991961F9E9F19A0"><enum>(a)</enum><header>In
general</header><text>Section 7206 (relating to fraud and false statements) is
amended—</text>
<paragraph id="IDC5AC628BD847443BBF125261BDC96726"><enum>(1)</enum><text>by striking
<quote>Any person who—</quote> and inserting <quote>(a)
<header-in-text level="subsection" style="OLC">In General</header-in-text>.—Any
person who—</quote>, and</text>
</paragraph><paragraph id="ID7DF5068496CD407A9124F04F52D401B5"><enum>(2)</enum><text>by adding at the
end the following new subsection:</text>
<quoted-block id="ID12D38FDB2E16470083CA4A313D2AD127" style="OLC">
<subsection id="ID8929A136401141D393812BE06B4050B0"><enum>(b)</enum><header>Increase in
monetary limitation for underpayment or overpayment of tax due to
fraud</header><text>If any portion of any underpayment (as defined in section
6664(a)) or overpayment (as defined in section 6401(a)) of tax required to be
shown on a return is attributable to fraudulent action described in subsection
(a), the applicable dollar amount under subsection (a) shall in no event be
less than an amount equal to such portion. A rule similar to the rule under
section 6663(b) shall apply for purposes of determining the portion so
attributable.</text>
</subsection><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph></subsection><subsection id="ID785636631FFF4ADA9EDB2311A498D386"><enum>(b)</enum><header>Increase in
penalties</header>
<paragraph id="ID918E2769126645A3B9D5196317EAFCDE"><enum>(1)</enum><header>Attempt to
evade or defeat tax</header><text>Section 7201 is amended—</text>
<subparagraph id="ID208D66B547444B5CBA3D5A86D26E6E8B"><enum>(A)</enum><text>by striking
<quote>$100,000</quote> and inserting <quote>$500,000</quote>,</text>
</subparagraph><subparagraph id="ID9B99BCBB73EB41F08CBEEAC0BA8F7D76"><enum>(B)</enum><text>by striking
<quote>$500,000</quote> and inserting <quote>$1,000,000</quote>, and</text>
</subparagraph><subparagraph id="ID141CD9BA5FE645A28C214D6C715E5CA4"><enum>(C)</enum><text>by striking
<quote>5 years</quote> and inserting <quote>10 years</quote>.</text>
</subparagraph></paragraph><paragraph id="ID590E8951B93E430998E334D772A623CF"><enum>(2)</enum><header>Willful failure
to file return, supply information, or pay tax</header><text>Section 7203 is
amended—</text>
<subparagraph id="IDAE7FC2BDA8224046AFB0EE2F999BD212"><enum>(A)</enum><text>in the first
sentence—</text>
<clause id="ID1ED2C2692F2C4172AEF058D2F96149AB"><enum>(i)</enum><text>by
striking <quote>Any person</quote> and inserting the following:</text>
<quoted-block id="ID3BC0C3DCF3B346079A3A127E5A30034F" style="OLC">
<subsection id="IDB5CC613E1A9A49CC9BB5FA6024D1ED27"><enum>(a)</enum><header>In
general</header><text>Any person</text>
</subsection><after-quoted-block>,
and</after-quoted-block></quoted-block>
</clause><clause id="ID5DB2EBA04EC4473FA63FA1219CAD06DB"><enum>(ii)</enum><text>by
striking <quote>$25,000</quote> and inserting <quote>$50,000</quote>,</text>
</clause></subparagraph><subparagraph id="ID0C0581797533401493B9B2D3D789C8BF"><enum>(B)</enum><text>in the third
sentence, by striking <quote>section</quote> and inserting
<quote>subsection</quote>, and</text>
</subparagraph><subparagraph id="ID2F834100446441C19A142D1F0CBDA77F"><enum>(C)</enum><text>by adding at the
end the following new subsection:</text>
<quoted-block id="IDB91F11D88A254E3985318D1BCC3FBB6B" style="OLC">
<subsection id="ID02C6DAB6E3F24F4CBC49D8540745ECDC"><enum>(b)</enum><header>Aggravated
failure to file</header>
<paragraph id="ID75E3038B819942389B582AD808E090A3"><enum>(1)</enum><header>In
general</header><text>In the case of any failure described in paragraph (2),
the first sentence of subsection (a) shall be applied by substituting—</text>
<subparagraph id="IDF5ED36C5C3C6472C8DABE72B40882D15"><enum>(A)</enum><text><quote>felony</quote>
for <quote>misdemeanor</quote>,</text>
</subparagraph><subparagraph id="ID95B2F72FAE914F768287191E63933B5A"><enum>(B)</enum><text><quote>$500,000
($1,000,000</quote> for <quote>$25,000 ($100,000</quote>, and</text>
</subparagraph><subparagraph id="IDCD6E2E3611D74639B615344623BE3341"><enum>(C)</enum><text><quote>10
years</quote> for <quote>1 year</quote>.</text>
</subparagraph></paragraph><paragraph id="IDCC477F78BF97481CB8682EF2D24091BB"><enum>(2)</enum><header>Failure
described</header><text>A failure described in this paragraph is a failure to
make a return described in subsection (a) for a period of 3 or more consecutive
taxable years and the aggregated tax liability for such period is at least
$100,000.</text>
</paragraph></subsection><after-quoted-block>.</after-quoted-block></quoted-block>
</subparagraph></paragraph><paragraph id="IDFB2A6CC9A4D74BB6B6A95E58E376D43C"><enum>(3)</enum><header>Fraud and false
statements</header><text>Section 7206(a) (as redesignated by subsection (a)) is
amended—</text>
<subparagraph id="ID5FBACFA45E744DBFB4CADBF22B77D71E"><enum>(A)</enum><text>by striking
<quote>$100,000</quote> and inserting <quote>$500,000</quote>,</text>
</subparagraph><subparagraph id="ID6B239FB43883474BA6BD4FA7843AE892"><enum>(B)</enum><text>by striking
<quote>$500,000</quote> and inserting <quote>$1,000,000</quote>, and</text>
</subparagraph><subparagraph id="IDAE5DCD9D540C4B64B4B905C70E95693B"><enum>(C)</enum><text>by striking
<quote>3 years</quote> and inserting <quote>5 years</quote>.</text>
</subparagraph></paragraph></subsection><subsection id="ID8C8880813B28451FA3116436A4FAC392"><enum>(c)</enum><header>Effective
date</header><text>The amendments made by this section shall apply to actions,
and failures to act, occurring after the date of the enactment of this
Act.</text>
</subsection></section><section id="ID734993557CAB4738A03B93E351F35A9E"><enum>532.</enum><header>Doubling of
certain penalties, fines, and interest on underpayments related to certain
offshore financial arrangements</header>
<subsection id="ID8E91925337CA40EDBE617279D44BEDA0"><enum>(a)</enum><header>Determination
of penalty</header>
<paragraph id="IDDB3367C7679C4A2D9D1EA7A7A1D217F4"><enum>(1)</enum><header>In
general</header><text>Notwithstanding any other provision of law, in the case
of an applicable taxpayer—</text>
<subparagraph id="IDCC63AA2BE9754A0FA2088B3B474899EB"><enum>(A)</enum><text>the determination
as to whether any interest or applicable penalty is to be imposed with respect
to any arrangement described in paragraph (2), or to any underpayment of
Federal income tax attributable to items arising in connection with any such
arrangement, shall be made without regard to the rules of subsections (b), (c),
and (d) of section 6664 of the Internal Revenue Code of 1986, and</text>
</subparagraph><subparagraph id="ID6A4E43B008B346779CD715FF41B63EA7"><enum>(B)</enum><text>if any such
interest or applicable penalty is imposed, the amount of such interest or
penalty shall be equal to twice that determined without regard to this
section.</text>
</subparagraph></paragraph><paragraph id="ID570C214D82CB4A60A3DE67064E0C86F0"><enum>(2)</enum><header>Applicable
taxpayer</header><text>For purposes of this subsection—</text>
<subparagraph id="ID0439605FA50E4584989F4B97D756D8CF"><enum>(A)</enum><header>In
general</header><text>The term <term>applicable taxpayer</term> means a
taxpayer which—</text>
<clause id="ID7F5268D6D7904E0587BA6728E849D5AC"><enum>(i)</enum><text>has
underreported its United States income tax liability with respect to any item
which directly or indirectly involves—</text>
<subclause id="ID79FEADF2E89746A5986B4C97EBB657B9"><enum>(I)</enum><text>any financial
arrangement which in any manner relies on the use of offshore payment
mechanisms (including credit, debit, or charge cards) issued by banks or other
entities in foreign jurisdictions, or</text>
</subclause><subclause id="ID8DC6A34DDCE84C3AA6858F1D5FAF7987"><enum>(II)</enum><text>any offshore
financial arrangement (including any arrangement with foreign banks, financial
institutions, corporations, partnerships, trusts, or other entities),
and</text>
</subclause></clause><clause id="ID142854BD34164CE7B22FE7E33E6C57D2"><enum>(ii)</enum><text>has neither
signed a closing agreement pursuant to the Voluntary Offshore Compliance
Initiative established by the Department of the Treasury under Revenue
Procedure 2003-11 nor voluntarily disclosed its participation in such
arrangement by notifying the Internal Revenue Service of such arrangement prior
to the issue being raised by the Internal Revenue Service during an
examination.</text>
</clause></subparagraph><subparagraph id="ID1BDEB4350E1A41439AE506B8EACA9210"><enum>(B)</enum><header>Authority to
waive</header><text>The Secretary of the Treasury or the Secretary’s delegate
may waive the application of paragraph (1) to any taxpayer if the Secretary or
the Secretary’s delegate determines that the use of such offshore payment
mechanisms is incidental to the transaction and, in addition, in the case of a
trade or business, such use is conducted in the ordinary course of the type of
trade or business of the taxpayer.</text>
</subparagraph><subparagraph id="ID2EDB4C62B76D48D5A1172A72F262B90B"><enum>(C)</enum><header>Issues
raised</header><text>For purposes of subparagraph (A)(ii), an item shall be
treated as an issue raised during an examination if the individual examining
the return—</text>
<clause id="IDEEB6A926AFE242C4A9CE05594C2808BF"><enum>(i)</enum><text>communicates to
the taxpayer knowledge about the specific item, or</text>
</clause><clause id="ID796E6E0081004B3DBF7B1A0F9377899E"><enum>(ii)</enum><text>has made a
request to the taxpayer for information and the taxpayer could not make a
complete response to that request without giving the examiner knowledge of the
specific item.</text>
</clause></subparagraph></paragraph></subsection><subsection id="IDD433910161294882B526E7EC9FF4D0F7"><enum>(b)</enum><header>Definitions and
rules</header><text>For purposes of this section—</text>
<paragraph id="IDAB75128C855546A5B8F0C8B9D87AF96A"><enum>(1)</enum><header>Applicable
penalty</header><text>The term <term>applicable penalty</term> means any
penalty, addition to tax, or fine imposed under chapter 68 of the Internal
Revenue Code of 1986.</text>
</paragraph><paragraph id="ID4F57E676D63B4FED89B04500E298F141"><enum>(2)</enum><header>Fees and
expenses</header><text>The Secretary of the Treasury may retain and use an
amount not in excess of 25 percent of all additional interest, penalties,
additions to tax, and fines collected under this section to be used for
enforcement and collection activities of the Internal Revenue Service. The
Secretary shall keep adequate records regarding amounts so retained and used.
The amount credited as paid by any taxpayer shall be determined without regard
to this paragraph.</text>
</paragraph></subsection><subsection id="ID6801CE96122E4089989D9F569B5DB8B6"><enum>(c)</enum><header>Report by
Secretary</header><text>The Secretary shall each year conduct a study and
report to Congress on the implementation of this section during the preceding
year, including statistics on the number of taxpayers affected by such
implementation and the amount of interest and applicable penalties asserted,
waived, and assessed during such preceding year.</text>
</subsection><subsection commented="no" display-inline="no-display-inline" id="ID281778057DD047BB87DD173F4F454E72"><enum>(d)</enum><header>Effective
date</header><text>The provisions of this section shall apply to interest,
penalties, additions to tax, and fines with respect to any taxable year if, as
of the date of the enactment of this Act, the assessment of any tax, penalty,
or interest with respect to such taxable year is not prevented by the operation
of any law or rule of law.</text>
</subsection></section><section id="ID5A35287E363D4D1E8E2FFC4DD29AE3A4"><enum>533.</enum><header>Denial of
deduction for certain fines, penalties, and other amounts</header>
<subsection id="ID1E5F7FC8876A4222B5514A4C9E0A61DF"><enum>(a)</enum><header>In
General</header><text>Subsection (f) of section 162 (relating to trade or
business expenses) is amended to read as follows:</text>
<quoted-block id="ID0360C9615D3D4DAF8931C433C3A119BB" style="OLC">
<subsection id="ID3116108385EC403AA793D558A326E15C"><enum>(f)</enum><header>Fines,
Penalties, and Other Amounts</header>
<paragraph id="IDB180FE81BFBC41488BFD6027CB0B7D1D"><enum>(1)</enum><header>In
general</header><text>Except as provided in paragraph (2), no deduction
otherwise allowable shall be allowed under this chapter for any amount paid or
incurred (whether by suit, agreement, or otherwise) to, or at the direction of,
a government or entity described in paragraph (4) in relation to the violation
of any law or the investigation or inquiry by such government or entity into
the potential violation of any law.</text>
</paragraph><paragraph id="ID4E114E4E12DD45F3912BE382633F0367"><enum>(2)</enum><header>Exception for
amounts constituting restitution or paid to come into compliance with
law</header><text>Paragraph (1) shall not apply to any amount which—</text>
<subparagraph id="ID66EBE2BF4F494734BA92874A2C46CF95"><enum>(A)</enum><text>the taxpayer
establishes—</text>
<clause id="ID22BD3773819A43678E55C35CB9E3198C"><enum>(i)</enum><text>constitutes
restitution (including remediation of property) for damage or harm caused by or
which may be caused by the violation of any law or the potential violation of
any law, or</text>
</clause><clause id="ID01BF32BD7D7E4F45BC7E4933A144F463"><enum>(ii)</enum><text>is paid to come
into compliance with any law which was violated or involved in the
investigation or inquiry, and</text>
</clause></subparagraph><subparagraph id="IDC015B4B1FBD54D0796264214CE865F0F"><enum>(B)</enum><text>is identified as
restitution or as an amount paid to come into compliance with the law, as the
case may be, in the court order or settlement agreement.</text>
</subparagraph><continuation-text continuation-text-level="paragraph">Identification pursuant to
subparagraph (B) alone shall not satisfy the requirement under subparagraph
(A). This paragraph shall not apply to any amount paid or incurred as
reimbursement to the government or entity for the costs of any investigation or
litigation.</continuation-text></paragraph><paragraph id="ID1457072FEEF4424E9CCD74618A9A3632"><enum>(3)</enum><header>Exception for
amounts paid or incurred as the result of certain court
orders</header><text>Paragraph (1) shall not apply to any amount paid or
incurred by order of a court in a suit in which no government or entity
described in paragraph (4) is a party.</text>
</paragraph><paragraph id="ID0B4CADE57119469E8C798691E8FF2077"><enum>(4)</enum><header>Certain
nongovernmental regulatory entities</header><text>An entity is described in
this paragraph if it is—</text>
<subparagraph id="IDE3C835FDE9B549E1AD8BF7FA225F9921"><enum>(A)</enum><text>a nongovernmental
entity which exercises self-regulatory powers (including imposing sanctions) in
connection with a qualified board or exchange (as defined in section
1256(g)(7)), or</text>
</subparagraph><subparagraph id="IDB1DB5A08E2E14AB9BD26D049EBD5B4A6"><enum>(B)</enum><text>to the extent
provided in regulations, a nongovernmental entity which exercises
self-regulatory powers (including imposing sanctions) as part of performing an
essential governmental function.</text>
</subparagraph></paragraph><paragraph id="ID1068D0E962A24D2BAA07D23093C65E7E"><enum>(5)</enum><header>Exception for
taxes due</header><text>Paragraph (1) shall not apply to any amount paid or
incurred as taxes
due.</text>
</paragraph></subsection><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="ID96C8B9F12EB14D0CBC1EFA2DD1B3F7AE"><enum>(b)</enum><header>Reporting of
Deductible Amounts</header>
<paragraph id="ID94DA73F1AF4642A89FE778C3B2D4A3FA"><enum>(1)</enum><header>In
general</header><text>Subpart B of part III of subchapter A of chapter 61 is
amended by inserting after section 6050T the following new section:</text>
<quoted-block id="IDE28BFC693EE04A0D95264E5FB5B59F3A" style="OLC">
<section id="IDADB32A75C6484ED5B4D37DF3FB20C321"><enum>6050U.</enum><header>Information
with respect to certain fines, penalties, and other amounts</header>
<subsection id="ID5AF48AE139BF4C9E8AF4DFFFEBABC724"><enum>(a)</enum><header>Requirement of
Reporting</header>
<paragraph id="ID782A0574DA7C411DB82C4CF5CCB7F848"><enum>(1)</enum><header>In
general</header><text>The appropriate official of any government or entity
which is described in section 162(f)(4) which is involved in a suit or
agreement described in paragraph (2) shall make a return in such form as
determined by the Secretary setting forth—</text>
<subparagraph id="IDE961688881B747ED895F0D23C5AD4F37"><enum>(A)</enum><text>the amount
required to be paid as a result of the suit or agreement to which paragraph (1)
of section 162(f) applies,</text>
</subparagraph><subparagraph id="ID33A21425A4364FAA808EF59208ACE3EF"><enum>(B)</enum><text>any amount
required to be paid as a result of the suit or agreement which constitutes
restitution or remediation of property, and</text>
</subparagraph><subparagraph id="IDF3F00BD4371D4A7DBA976B8BBC1BB754"><enum>(C)</enum><text>any amount
required to be paid as a result of the suit or agreement for the purpose of
coming into compliance with any law which was violated or involved in the
investigation or inquiry.</text>
</subparagraph></paragraph><paragraph id="ID03C769B013FA40E5BB6EB7B74144C525"><enum>(2)</enum><header>Suit or
agreement described</header>
<subparagraph id="ID87B610D31F784BB288694DF0F6AF8BD6"><enum>(A)</enum><header>In
general</header><text>A suit or agreement is described in this paragraph
if—</text>
<clause id="IDF86026E68AB346D5BA8F4BFBF474039F"><enum>(i)</enum><text>it is—</text>
<subclause id="ID71436C537CE0443F97F79BC460317A7D"><enum>(I)</enum><text>a suit with
respect to a violation of any law over which the government or entity has
authority and with respect to which there has been a court order, or</text>
</subclause><subclause id="IDDE2FA8FEC9534BF98E66DF82C9CCA9F5"><enum>(II)</enum><text>an agreement
which is entered into with respect to a violation of any law over which the
government or entity has authority, or with respect to an investigation or
inquiry by the government or entity into the potential violation of any law
over which such government or entity has authority, and</text>
</subclause></clause><clause id="ID13F532BF87944A3FBEB2A44119D8BC37"><enum>(ii)</enum><text>the aggregate
amount involved in all court orders and agreements with respect to the
violation, investigation, or inquiry is $600 or more.</text>
</clause></subparagraph><subparagraph id="IDF57AE4A88276498993D62A9205C71A0E"><enum>(B)</enum><header>Adjustment of
reporting threshold</header><text>The Secretary may adjust the $600 amount in
subparagraph (A)(ii) as necessary in order to ensure the efficient
administration of the internal revenue laws.</text>
</subparagraph></paragraph><paragraph id="IDAE6890803EF247B5AA35C8103E2C89DA"><enum>(3)</enum><header>Time of
filing</header><text>The return required under this subsection shall be filed
not later than—</text>
<subparagraph id="ID08AD427D4B9D45D7AAF146CEE99BFD63"><enum>(A)</enum><text>30 days after the
date on which a court order is issued with respect to the suit or the date the
agreement is entered into, as the case may be, or</text>
</subparagraph><subparagraph id="ID2BFCFA7939FD4C688C08ADF79AA2B299"><enum>(B)</enum><text>the date
specified Secretary.</text>
</subparagraph></paragraph></subsection><subsection id="ID53277FEE1B60437BB9F4B8A7E9658855"><enum>(b)</enum><header>Statements to
Be Furnished to Individuals Involved in the Settlement</header><text>Every
person required to make a return under subsection (a) shall furnish to each
person who is a party to the suit or agreement a written statement
showing—</text>
<paragraph id="ID7EC934451FE64A80B4F789B2610AEE6A"><enum>(1)</enum><text>the name of the
government or entity, and</text>
</paragraph><paragraph id="ID58CC974B367F4F96AB368E7C0C1995C6"><enum>(2)</enum><text>the information
supplied to the Secretary under subsection (a)(1).</text>
</paragraph><continuation-text continuation-text-level="subsection">The
written statement required under the preceding sentence shall be furnished to
the person at the same time the government or entity provides the Secretary
with the information required under subsection (a).</continuation-text></subsection><subsection id="IDA20CAADB9AF24E5A8A8519FDB1F1CD17"><enum>(c)</enum><header>Appropriate
Official Defined</header><text>For purposes of this section, the term
<term>appropriate official</term> means the officer or employee having control
of the suit, investigation, or inquiry or the person appropriately designated
for purposes of this
section.</text>
</subsection></section><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph><paragraph id="IDA461997246B34794B73B253292116D79"><enum>(2)</enum><header>Conforming
amendment</header><text>The table of sections for subpart B of part III of
subchapter A of chapter 61 is amended by inserting after the item relating to
section 6050T the following new item:</text>
<quoted-block id="ID274F9C1EFA5F4AD1934C311ED4DC9251" style="OLC">
<toc regeneration="no-regeneration">
<toc-entry level="section">Sec. 6050U. Information with respect to
certain fines, penalties, and other
amounts.</toc-entry>
</toc>
<after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph></subsection><subsection commented="no" display-inline="no-display-inline" id="ID25A56758682449A3A66E38DB93C17A8E"><enum>(c)</enum><header>Effective
Date</header><text>The amendments made by this section shall apply to amounts
paid or incurred on or after the date of the enactment of this Act, except that
such amendments shall not apply to amounts paid or incurred under any binding
order or agreement entered into before such date. Such exception shall not
apply to an order or agreement requiring court approval unless the approval was
obtained before such date.</text>
</subsection></section><section id="ID45833AFAC9CF40B38F2A541CAF14B3F0"><enum>534.</enum><header>Denial of
deduction for punitive damages</header>
<subsection id="IDBA10E4353870480AAC3E3FA3886F2AD8"><enum>(a)</enum><header>Disallowance of
deduction</header>
<paragraph id="ID1DE22B03B6CD49DBBAC1AEA2016BF18F"><enum>(1)</enum><header>In
general</header><text>Section 162(g) (relating to treble damage payments under
the antitrust laws) is amended—</text>
<subparagraph id="IDDCEEF3F7F78B4814AFB65D7D00A98F20"><enum>(A)</enum><text>by redesignating
paragraphs (1) and (2) as subparagraphs (A) and (B), respectively,</text>
</subparagraph><subparagraph id="ID8D3BA7D86F604BE7808B53EB60D261D5"><enum>(B)</enum><text>by striking
<quote>If</quote> and inserting:</text>
<quoted-block id="ID3D0606B853364F98868B426B90B0EA8B" style="OLC">
<paragraph id="ID5F64A9AB6BC44A16B2C5EDB6D1F0C463"><enum>(1)</enum><header>Treble
damages</header><text>If</text>
</paragraph><after-quoted-block>,
and</after-quoted-block></quoted-block>
</subparagraph><subparagraph id="IDA774A68C6AA14A0E92822FF5B2CCF9BC"><enum>(C)</enum><text>by adding at the
end the following new paragraph:</text>
<quoted-block id="IDCE4BC6E816D94E85972308E976B245E7" style="OLC">
<paragraph id="IDF6FF8E4CDF0D4853985C55109E8CB41C"><enum>(2)</enum><header>Punitive
damages</header><text>No deduction shall be allowed under this chapter for any
amount paid or incurred for punitive damages in connection with any judgment
in, or settlement of, any action. This paragraph shall not apply to punitive
damages described in section
104(c).</text>
</paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subparagraph></paragraph><paragraph id="ID7B29D2E5A55F47F98A4D4B534E0F2E90"><enum>(2)</enum><header>Conforming
amendment</header><text>The heading for section 162(g) is amended by inserting
<quote><header-in-text level="subsection">or Punitive
Damages</header-in-text></quote> after <quote><header-in-text level="subsection">Laws</header-in-text></quote>.</text>
</paragraph></subsection><subsection id="ID1B3B9D7433504A5BBE7CDF9CF8D59814"><enum>(b)</enum><header>Inclusion in
income of punitive damages paid by insurer or otherwise</header>
<paragraph id="IDBCCF8D5F7FD04E568C3D2A83EA11144A"><enum>(1)</enum><header>In
general</header><text>Part II of subchapter B of chapter 1 (relating to items
specifically included in gross income) is amended by adding at the end the
following new section:</text>
<quoted-block id="ID7A95877813FB458BA6CF17FED3D0C4B8" style="OLC">
<section id="ID79DC97AFB5FE4B5982D4FC0FF2727667"><enum>91.</enum><header>Punitive
damages compensated by insurance or otherwise</header><text display-inline="no-display-inline">Gross income shall include any amount paid
to or on behalf of a taxpayer as insurance or otherwise by reason of the
taxpayer’s liability (or agreement) to pay punitive
damages.</text>
</section><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph><paragraph id="IDEC7E46AE9CDA4EB0976CA32C40443C1B"><enum>(2)</enum><header>Reporting
requirements</header><text>Section 6041 (relating to information at source) is
amended by adding at the end the following new subsection:</text>
<quoted-block id="IDB7A8F746E6D74DF0A0A81314DA74D4DE" style="OLC">
<subsection id="ID1BCC251B769847CAB324F29CA5A53BBD"><enum>(f)</enum><header>Section to
apply to punitive damages compensation</header><text>This section shall apply
to payments by a person to or on behalf of another person as insurance or
otherwise by reason of the other person’s liability (or agreement) to pay
punitive
damages.</text>
</subsection><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph><paragraph id="ID077F00EF40BA4E4094EC7A4812471CCB"><enum>(3)</enum><header>Conforming
amendment</header><text>The table of sections for part II of subchapter B of
chapter 1 is amended by adding at the end the following new item:</text>
<quoted-block id="IDB22B92F05D484E36B79EBB6EB1E01FDC" style="OLC">
<toc regeneration="no-regeneration">
<toc-entry level="section">Sec. 91. Punitive damages compensated by
insurance or
otherwise.</toc-entry>
</toc>
<after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph></subsection><subsection commented="no" display-inline="no-display-inline" id="IDAAFD8910BAE840B992249E204828543C"><enum>(c)</enum><header>Effective
date</header><text>The amendments made by this section shall apply to damages
paid or incurred on or after the date of the enactment of this Act.</text>
</subsection></section><section id="ID1B39BF2E6ED84E2185C56824A418914B"><enum>535.</enum><header>Increase in
penalty for bad checks and money orders</header>
<subsection id="ID6C141FBC9CC54460A1661B84D7355EED"><enum>(a)</enum><header>In
general</header><text>Section 6657 (relating to bad checks) is amended—</text>
<paragraph id="ID7170EBC4F05F46CEA5118F9619909A5F"><enum>(1)</enum><text>by striking
<quote>$750</quote> and inserting <quote>$1,250</quote>, and</text>
</paragraph><paragraph id="ID1A638987A9274F4B81D10D901237F956"><enum>(2)</enum><text>by striking
<quote>$15</quote> and inserting <quote>$25</quote>.</text>
</paragraph></subsection><subsection commented="no" display-inline="no-display-inline" id="IDC25F861EB211449FBA4DECCB79B1B071"><enum>(b)</enum><header>Effective
date</header><text>The amendments made by this section apply to checks or money
orders received after the date of the enactment of this Act.</text>
</subsection></section></subtitle><subtitle id="id361E09670F164BF0A471FEA675772A43"><enum>E</enum><header>Provisions to
discourage expatriation</header>
<section id="id8B2072107ED046AB99AB270BF09460E1"><enum>541.</enum><header>Tax treatment
of inverted entities</header>
<subsection id="idA6961F6F5D5C49C698B6999A775260D8"><enum>(a)</enum><header>In
general</header><text>Section 7874 is amended—</text>
<paragraph id="idD849D8C539A244248B0F31BA60A32653"><enum>(1)</enum><text>by striking
<quote>March 4, 2003</quote> in subsection (a)(2)(B)(i) and in the matter
following subsection (a)(2)(B)(iii) and inserting <quote>March 20,
2002</quote>,</text>
</paragraph><paragraph id="id98ED97C6A4AD45438E12DAFB2C07B522"><enum>(2)</enum><text>by striking
<quote>at least 60 percent</quote> in subsection (a)(2)(B)(ii) and inserting
<quote>more than 50 percent</quote>,</text>
</paragraph><paragraph id="id6FCDF1F263D846A8A466915ECE4A20E8"><enum>(3)</enum><text>by striking
<quote>80 percent</quote> in subsection (b) and inserting <quote>at least 80
percent</quote>,</text>
</paragraph><paragraph id="id7F0213634DA5424793F3E0C2F5BAEF06"><enum>(4)</enum><text>by striking
<quote>60 percent</quote> in subsection (b) and inserting <quote>more than 50
percent</quote>,</text>
</paragraph><paragraph id="id213CCFCEB7344F9F85F41510C1FE5FB0"><enum>(5)</enum><text>by adding at the
end of subsection (a)(2) the following new sentence: <quote>Except as provided
in regulations, an acquisition of properties of a domestic corporation shall
not be treated as described in subparagraph (B) if none of the corporation’s
stock was readily tradeable on an established securities market at any time
during the 4-year period ending on the date of the acquisition.</quote>,
and</text>
</paragraph><paragraph id="id5CE282C137CF43CC997FF7544B03D5D4"><enum>(6)</enum><text>by redesignating
subsection (g) as subsection (h) and by inserting after subsection (f) the
following new subsection:</text>
<quoted-block display-inline="no-display-inline" id="id05FEB13B7C844834933A728CB3BB3407" style="OLC">
<subsection id="id68FE0B2590404C27B28DC5997054D6DA"><enum>(g)</enum><header>Special rules
applicable to expatriated entities</header>
<paragraph id="id33CAB7798DCC4238AF51794B2910C374"><enum>(1)</enum><header>Increases in
accuracy-related penalties</header><text>In the case of any underpayment of tax
of an expatriated entity—</text>
<subparagraph id="idA744FE05141248A29206411B5C616A28"><enum>(A)</enum><text>section 6662(a)
shall be applied with respect to such underpayment by substituting <quote>30
percent</quote> for <quote>20 percent</quote>, and</text>
</subparagraph><subparagraph id="id6FE64814495D48EE81231F9BB47A3900"><enum>(B)</enum><text>if such
underpayment is attributable to one or more gross valuation understatements,
the increase in the rate of penalty under section 6662(h) shall be to 50
percent rather than 40 percent.</text>
</subparagraph></paragraph><paragraph id="idDDE1FACDBDE249ED8525C38C1625DADE"><enum>(2)</enum><header>Modifications
of limitation on interest deduction</header><text>In the case of an expatriated
entity, section 163(j) shall be applied—</text>
<subparagraph id="idA2298FD507D748E088D6FAD6F3CA39A7"><enum>(A)</enum><text>without regard to
paragraph (2)(A)(ii) thereof, and</text>
</subparagraph><subparagraph id="idEFAC0E9C957243939FDD01F2BC777BA0"><enum>(B)</enum><text>by substituting
<quote>25 percent</quote> for <quote>50 percent</quote> each place it appears
in paragraph (2)(B)
thereof.</text>
</subparagraph></paragraph></subsection><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph></subsection><subsection commented="no" display-inline="no-display-inline" id="id259E3A500C0D40589AF14422D6BE7075"><enum>(b)</enum><header>Effective
date</header><text>The amendments made by this section shall apply to taxable
years ending after March 20, 2002.</text>
</subsection></section><section id="ID8B4897AEB5DC4C4794E4A556FD194168"><enum>542.</enum><header>Revision of
tax rules on expatriation of individuals</header>
<subsection id="ID97445D9CD582482E80A1A66C73454B05"><enum>(a)</enum><header>In
general</header><text>Subpart A of part II of subchapter N of chapter 1 is
amended by inserting after section 877 the following new section:</text>
<quoted-block id="IDC716BCB2F12C461CB5CB80EFB9C96AC2" style="OLC">
<section id="IDEC45E9AF80EE4F508CD2E195C76AD2E2"><enum>877A.</enum><header>Tax
responsibilities of expatriation</header>
<subsection id="ID1C81DA962E9B451F9BD66F7ABAFAB435"><enum>(a)</enum><header>General
rules</header><text>For purposes of this subtitle—</text>
<paragraph id="IDEB2F8C5E9A004F63BED40D935E118281"><enum>(1)</enum><header>Mark to
market</header><text>Except as provided in subsections (d) and (f), all
property of a covered expatriate to whom this section applies shall be treated
as sold on the day before the expatriation date for its fair market
value.</text>
</paragraph><paragraph id="ID5CA23D6035D640F3930377A571B208CA"><enum>(2)</enum><header>Recognition of
gain or loss</header><text>In the case of any sale under paragraph (1)—</text>
<subparagraph id="ID92F71B94CF1448CBB8EA9D7E505C8A3B"><enum>(A)</enum><text>notwithstanding
any other provision of this title, any gain arising from such sale shall be
taken into account for the taxable year of the sale, and</text>
</subparagraph><subparagraph id="IDCBFF2279140745B99C3CA27F0DC9AFED"><enum>(B)</enum><text>any loss arising
from such sale shall be taken into account for the taxable year of the sale to
the extent otherwise provided by this title, except that section 1091 shall not
apply to any such loss.</text>
</subparagraph><continuation-text continuation-text-level="paragraph">Proper
adjustment shall be made in the amount of any gain or loss subsequently
realized for gain or loss taken into account under the preceding
sentence.</continuation-text></paragraph><paragraph id="ID3876FEE2FAC24CB6BD7BAC37D7A95DFF"><enum>(3)</enum><header>Exclusion for
certain gain</header>
<subparagraph id="ID2CBA46939D9E468B8B150C6B5F75F46F"><enum>(A)</enum><header>In
general</header><text>The amount which, but for this paragraph, would be
includible in the gross income of any individual by reason of this section
shall be reduced (but not below zero) by $600,000. For purposes of this
paragraph, allocable expatriation gain taken into account under subsection
(f)(2) shall be treated in the same manner as an amount required to be
includible in gross income.</text>
</subparagraph><subparagraph id="IDF2B5CA25DE8547B5BCD7C97BD462CD17"><enum>(B)</enum><header>Cost-of-living
adjustment</header>
<clause id="ID0DADC1092AAD463A85ECF67CF4DAD48C"><enum>(i)</enum><header>In
general</header><text>In the case of an expatriation date occurring in any
calendar year after 2005, the $600,000 amount under subparagraph (A) shall be
increased by an amount equal to—</text>
<subclause id="ID4A0C799B12784D2AA0C8FB8A236F9ACA"><enum>(I)</enum><text>such dollar
amount, multiplied by</text>
</subclause><subclause id="IDE1EFC2E1A3AB42BAB61054F5E65A1DE5"><enum>(II)</enum><text>the
cost-of-living adjustment determined under section 1(f)(3) for such calendar
year, determined by substituting <quote>calendar year 2004</quote> for
<quote>calendar year 1992</quote> in subparagraph (B) thereof.</text>
</subclause></clause><clause id="ID19D3D5EC8A8E48F4995937936B6AF497"><enum>(ii)</enum><header>Rounding
rules</header><text>If any amount after adjustment under clause (i) is not a
multiple of $1,000, such amount shall be rounded to the next lower multiple of
$1,000.</text>
</clause></subparagraph></paragraph><paragraph id="IDAB3DCDD07719464FA692D48B42F0FF7A"><enum>(4)</enum><header>Election to
continue to be taxed as united states citizen</header>
<subparagraph id="ID3B13BC0C7E9547CCB3EB89062B19C3C3"><enum>(A)</enum><header>In
general</header><text>If a covered expatriate elects the application of this
paragraph—</text>
<clause id="ID56F915DBD51E4827B930C2456D07A6E3"><enum>(i)</enum><text>this section
(other than this paragraph and subsection (i)) shall not apply to the
expatriate, but</text>
</clause><clause id="IDE4CE13C467404DDE9A3A4450A703C152"><enum>(ii)</enum><text>in the case of
property to which this section would apply but for such election, the
expatriate shall be subject to tax under this title in the same manner as if
the individual were a United States citizen.</text>
</clause></subparagraph><subparagraph id="ID18B755F7F18546FD822A889DBB5287B5"><enum>(B)</enum><header>Requirements</header><text>Subparagraph
(A) shall not apply to an individual unless the individual—</text>
<clause id="ID05BA3B688BCF4B17948C434FB751B4CD"><enum>(i)</enum><text>provides security
for payment of tax in such form and manner, and in such amount, as the
Secretary may require,</text>
</clause><clause id="IDBE2E1F5B5479422591213CAADEBF0765"><enum>(ii)</enum><text>consents to the
waiver of any right of the individual under any treaty of the United States
which would preclude assessment or collection of any tax which may be imposed
by reason of this paragraph, and</text>
</clause><clause id="IDAF6F8423FDBD470B98AAEEE37EC0E357"><enum>(iii)</enum><text>complies with
such other requirements as the Secretary may prescribe.</text>
</clause></subparagraph><subparagraph id="ID9B9F4F62108547CC84BA51350437B88F"><enum>(C)</enum><header>Election</header><text>An
election under subparagraph (A) shall apply to all property to which this
section would apply but for the election and, once made, shall be irrevocable.
Such election shall also apply to property the basis of which is determined in
whole or in part by reference to the property with respect to which the
election was made.</text>
</subparagraph></paragraph></subsection><subsection id="IDCD9BF5AA985A4FF28810490C12C7331A"><enum>(b)</enum><header>Election to
defer tax</header>
<paragraph id="ID1EF840C498AB418082086DAC0F60A1DB"><enum>(1)</enum><header>In
general</header><text>If the taxpayer elects the application of this subsection
with respect to any property treated as sold by reason of subsection (a), the
payment of the additional tax attributable to such property shall be postponed
until the due date of the return for the taxable year in which such property is
disposed of (or, in the case of property disposed of in a transaction in which
gain is not recognized in whole or in part, until such other date as the
Secretary may prescribe).</text>
</paragraph><paragraph id="ID6593EEE6674742A39C7C7004EEA82B8C"><enum>(2)</enum><header>Determination
of tax with respect to property</header><text>For purposes of paragraph (1),
the additional tax attributable to any property is an amount which bears the
same ratio to the additional tax imposed by this chapter for the taxable year
solely by reason of subsection (a) as the gain taken into account under
subsection (a) with respect to such property bears to the total gain taken into
account under subsection (a) with respect to all property to which subsection
(a) applies.</text>
</paragraph><paragraph id="ID24A2E0AB1FD14604975F317E8B53DB8A"><enum>(3)</enum><header>Termination of
postponement</header><text>No tax may be postponed under this subsection later
than the due date for the return of tax imposed by this chapter for the taxable
year which includes the date of death of the expatriate (or, if earlier, the
time that the security provided with respect to the property fails to meet the
requirements of paragraph (4), unless the taxpayer corrects such failure within
the time specified by the Secretary).</text>
</paragraph><paragraph id="IDE719B87A35474DA88F614A82ED6D18A5"><enum>(4)</enum><header>Security</header>
<subparagraph id="ID827ED5638641448FB99EA79B30E706DE"><enum>(A)</enum><header>In
general</header><text>No election may be made under paragraph (1) with respect
to any property unless adequate security is provided to the Secretary with
respect to such property.</text>
</subparagraph><subparagraph id="ID39E337CE46474724A758AF2A61F46ADB"><enum>(B)</enum><header>Adequate
security</header><text>For purposes of subparagraph (A), security with respect
to any property shall be treated as adequate security if—</text>
<clause id="IDDF5DEA3A2C6B4713976F486C75404BA5"><enum>(i)</enum><text>it is a bond in
an amount equal to the deferred tax amount under paragraph (2) for the
property, or</text>
</clause><clause id="ID0925BF44189E470792B94A0D4587B774"><enum>(ii)</enum><text>the taxpayer
otherwise establishes to the satisfaction of the Secretary that the security is
adequate.</text>
</clause></subparagraph></paragraph><paragraph id="ID4CF496F3C18D4CBBB33C08B6B4317E20"><enum>(5)</enum><header>Waiver of
certain rights</header><text>No election may be made under paragraph (1) unless
the taxpayer consents to the waiver of any right under any treaty of the United
States which would preclude assessment or collection of any tax imposed by
reason of this section.</text>
</paragraph><paragraph id="ID047E650331C64FB5A68BF3C5090B4B3F"><enum>(6)</enum><header>Elections</header><text>An
election under paragraph (1) shall only apply to property described in the
election and, once made, is irrevocable. An election may be made under
paragraph (1) with respect to an interest in a trust with respect to which gain
is required to be recognized under subsection (f)(1).</text>
</paragraph><paragraph id="IDFFF4A5AFCB3D417B91945C7930D69E19"><enum>(7)</enum><header>Interest</header><text>For
purposes of section 6601—</text>
<subparagraph id="IDED827A776FFA4600AEA34114E46618FA"><enum>(A)</enum><text>the last date for
the payment of tax shall be determined without regard to the election under
this subsection, and</text>
</subparagraph><subparagraph id="IDF2B9CF2AF0A94AB6A24A556A9C18F555"><enum>(B)</enum><text>section
6621(a)(2) shall be applied by substituting <quote>5 percentage points</quote>
for <quote>3 percentage points</quote> in subparagraph (B) thereof.</text>
</subparagraph></paragraph></subsection><subsection id="ID35024C29EE89470E845E94F02BD7E034"><enum>(c)</enum><header>Covered
expatriate</header><text>For purposes of this section—</text>
<paragraph id="IDF4707A71C1F043B9B6FA45B43AB31535"><enum>(1)</enum><header>In
general</header><text>Except as provided in paragraph (2), the term
<term>covered expatriate</term> means an expatriate.</text>
</paragraph><paragraph id="IDB92CC4E0F0BD4611A8CBF9E7C5A7E350"><enum>(2)</enum><header>Exceptions</header><text>An
individual shall not be treated as a covered expatriate if—</text>
<subparagraph id="ID1BBA30136DB94BAC97A42600A5EF49EA"><enum>(A)</enum><text>the
individual—</text>
<clause id="IDE0A780EFD2FE4923B0EFD3FDA072B895"><enum>(i)</enum><text>became at birth a
citizen of the United States and a citizen of another country and, as of the
expatriation date, continues to be a citizen of, and is taxed as a resident of,
such other country, and</text>
</clause><clause id="IDE76009299AAE4C66AD8041165BD90C1A"><enum>(ii)</enum><text>has not been a
resident of the United States (as defined in section 7701(b)(1)(A)(ii)) during
the 5 taxable years ending with the taxable year during which the expatriation
date occurs, or</text>
</clause></subparagraph><subparagraph id="IDE4F1CB847E2A4AEFA4336F7C836F2654"><enum>(B)</enum><clause commented="no" display-inline="yes-display-inline" id="IDE5BE6DDA234E441281170A14F995B7F9"><enum>(i)</enum><text>the individual’s
relinquishment of United States citizenship occurs before such individual
attains age 18<fraction>½</fraction>, and</text>
</clause><clause id="IDABC259238D6D417895185B006EFE073E" indent="up1"><enum>(ii)</enum><text>the individual has been a resident
of the United States (as so defined) for not more than 5 taxable years before
the date of relinquishment.</text>
</clause></subparagraph></paragraph></subsection><subsection id="IDD7A2E92E6AEA4B2BBAB0F6375B93EADE"><enum>(d)</enum><header>Exempt
property; special rules for pension plans</header>
<paragraph id="ID6A52B045948A47C1AD36E2A9591615AE"><enum>(1)</enum><header>Exempt
property</header><text>This section shall not apply to the following:</text>
<subparagraph id="ID0B4C1929BB104C9EAEDCD3B690B26C00"><enum>(A)</enum><header>United states
real property interests</header><text>Any United States real property interest
(as defined in section 897(c)(1)), other than stock of a United States real
property holding corporation which does not, on the day before the expatriation
date, meet the requirements of section 897(c)(2).</text>
</subparagraph><subparagraph id="ID76F1D777CBB5488FB8CC7BB769C821AE"><enum>(B)</enum><header>Specified
property</header><text>Any property or interest in property not described in
subparagraph (A) which the Secretary specifies in regulations.</text>
</subparagraph></paragraph><paragraph id="IDADEEA6109FBD4928904C76B3819EAEC9"><enum>(2)</enum><header>Special rules
for certain retirement plans</header>
<subparagraph id="IDC43787B74A9745FF84FE400CABEB499D"><enum>(A)</enum><header>In
general</header><text>If a covered expatriate holds on the day before the
expatriation date any interest in a retirement plan to which this paragraph
applies—</text>
<clause id="ID2DD8A33B065B4134BFDD777D9E24865B"><enum>(i)</enum><text>such interest
shall not be treated as sold for purposes of subsection (a)(1), but</text>
</clause><clause id="ID8D77C43E70E54DE694F4A5769F09D9AE"><enum>(ii)</enum><text>an amount equal
to the present value of the expatriate’s nonforfeitable accrued benefit shall
be treated as having been received by such individual on such date as a
distribution under the plan.</text>
</clause></subparagraph><subparagraph id="ID7FA1667D948D499BBB5BA1459676E3E7"><enum>(B)</enum><header>Treatment of
subsequent distributions</header><text>In the case of any distribution on or
after the expatriation date to or on behalf of the covered expatriate from a
plan from which the expatriate was treated as receiving a distribution under
subparagraph (A), the amount otherwise includible in gross income by reason of
the subsequent distribution shall be reduced by the excess of the amount
includible in gross income under subparagraph (A) over any portion of such
amount to which this subparagraph previously applied.</text>
</subparagraph><subparagraph id="IDD5347861CAD6410F8BEF45BC2A3B1579"><enum>(C)</enum><header>Treatment of
subsequent distributions by plan</header><text>For purposes of this title, a
retirement plan to which this paragraph applies, and any person acting on the
plan’s behalf, shall treat any subsequent distribution described in
subparagraph (B) in the same manner as such distribution would be treated
without regard to this paragraph.</text>
</subparagraph><subparagraph id="ID2368218C2D8344FEB1D556570867F0B0"><enum>(D)</enum><header>Applicable
plans</header><text>This paragraph shall apply to—</text>
<clause id="ID022643433B384560AE7B254082A02181"><enum>(i)</enum><text>any qualified
retirement plan (as defined in section 4974(c)),</text>
</clause><clause id="ID9E219328FC4A4A06B484C181B76683B0"><enum>(ii)</enum><text>an eligible
deferred compensation plan (as defined in section 457(b)) of an eligible
employer described in section 457(e)(1)(A), and</text>
</clause><clause id="IDA64DD2D31F9A4239AF2AFCF654CDD0ED"><enum>(iii)</enum><text>to the extent
provided in regulations, any foreign pension plan or similar retirement
arrangements or programs.</text>
</clause></subparagraph></paragraph></subsection><subsection id="ID88BC97470C0A4B4AA534A35C2A77DC97"><enum>(e)</enum><header>Definitions</header><text>For
purposes of this section—</text>
<paragraph id="ID79B2E9EB3A614CEB8B0DBF57A8E713E2"><enum>(1)</enum><header>Expatriate</header><text>The
term <term>expatriate</term> means—</text>
<subparagraph id="ID1A2B4CFF232A4F57AAEDA80444B979DD"><enum>(A)</enum><text>any United States
citizen who relinquishes citizenship, and</text>
</subparagraph><subparagraph id="ID64475017020E4532BA36BB763CA11149"><enum>(B)</enum><text>any long-term
resident of the United States who—</text>
<clause id="ID68613E0D31DB4520AED80E31CAE96262"><enum>(i)</enum><text>ceases to be a
lawful permanent resident of the United States (within the meaning of section
7701(b)(6)), or</text>
</clause><clause id="IDAB242959CAA1425F9A857928A2F9CB26"><enum>(ii)</enum><text>commences to be
treated as a resident of a foreign country under the provisions of a tax treaty
between the United States and the foreign country and who does not waive the
benefits of such treaty applicable to residents of the foreign country.</text>
</clause></subparagraph></paragraph><paragraph id="IDF801E7E30BA64615973492256C4E66BD"><enum>(2)</enum><header>Expatriation
date</header><text>The term <term>expatriation date</term> means—</text>
<subparagraph id="ID32B5C640A604425F9D15982C3F9EFFFD"><enum>(A)</enum><text>the date an
individual relinquishes United States citizenship, or</text>
</subparagraph><subparagraph id="ID864DD63386CB40CCACEB1C8BE9647B77"><enum>(B)</enum><text>in the case of a
long-term resident of the United States, the date of the event described in
clause (i) or (ii) of paragraph (1)(B).</text>
</subparagraph></paragraph><paragraph id="ID4E7E711D647544ABB48D79E56B3946DA"><enum>(3)</enum><header>Relinquishment
of citizenship</header><text>A citizen shall be treated as relinquishing United
States citizenship on the earliest of—</text>
<subparagraph id="ID7024DFACFABF4CDF95A962D8D36E1D83"><enum>(A)</enum><text>the date the
individual renounces such individual’s United States nationality before a
diplomatic or consular officer of the United States pursuant to paragraph (5)
of section 349(a) of the <act-name parsable-cite="INA">Immigration and
Nationality Act</act-name> (8 U.S.C. 1481(a)(5)),</text>
</subparagraph><subparagraph id="ID71D1F04FACF04B66B93BF69149E772C3"><enum>(B)</enum><text>the date the
individual furnishes to the United States Department of State a signed
statement of voluntary relinquishment of United States nationality confirming
the performance of an act of expatriation specified in paragraph (1), (2), (3),
or (4) of section 349(a) of the <act-name parsable-cite="INA">Immigration and
Nationality Act</act-name> (8 U.S.C. 1481(a)(1)–(4)),</text>
</subparagraph><subparagraph id="ID62F20C9378FE4886BFC55AF164D93DCF"><enum>(C)</enum><text>the date the
United States Department of State issues to the individual a certificate of
loss of nationality, or</text>
</subparagraph><subparagraph id="ID589585DE95B64F01A520644D177808A8"><enum>(D)</enum><text>the date a court
of the United States cancels a naturalized citizen’s certificate of
naturalization.</text>
</subparagraph><continuation-text continuation-text-level="paragraph">Subparagraph (A) or (B) shall not
apply to any individual unless the renunciation or voluntary relinquishment is
subsequently approved by the issuance to the individual of a certificate of
loss of nationality by the United States Department of State.</continuation-text></paragraph><paragraph id="IDD50C477DD14240AAB72171AE7FD80E64"><enum>(4)</enum><header>Long-term
resident</header><text>The term <term>long-term resident</term> has the meaning
given to such term by section 877(e)(2).</text>
</paragraph></subsection><subsection id="ID28C0B5087BB04B0FBA24C56791F0814F"><enum>(f)</enum><header>Special rules
applicable to beneficiaries’ interests in trust</header>
<paragraph id="IDB5A2746A11DB4F3DA1976C1B7A3628BD"><enum>(1)</enum><header>In
general</header><text>Except as provided in paragraph (2), if an individual is
determined under paragraph (3) to hold an interest in a trust on the day before
the expatriation date—</text>
<subparagraph id="ID68DA69543BAA4E4BBB36A20F43313518"><enum>(A)</enum><text>the individual
shall not be treated as having sold such interest,</text>
</subparagraph><subparagraph id="ID229F8ACD32A847B485678F11B8C65850"><enum>(B)</enum><text>such interest
shall be treated as a separate share in the trust, and</text>
</subparagraph><subparagraph id="ID60C44206BA7941F889C50007DD293940"><enum>(C)</enum><clause commented="no" display-inline="yes-display-inline" id="IDFBF515782039485FA7C9E6295C9AE59D"><enum>(i)</enum><text>such separate share
shall be treated as a separate trust consisting of the assets allocable to such
share,</text>
</clause><clause id="ID92CC118826B5405789CAFAD7330944B9" indent="up1"><enum>(ii)</enum><text>the separate trust shall be
treated as having sold its assets on the day before the expatriation date for
their fair market value and as having distributed all of its assets to the
individual as of such time, and</text>
</clause><clause id="IDBF109BAEFF024B0394BB4BE4BF553148" indent="up1"><enum>(iii)</enum><text>the individual shall be treated
as having recontributed the assets to the separate trust.</text>
</clause></subparagraph><continuation-text continuation-text-level="paragraph">Subsection
(a)(2) shall apply to any income, gain, or loss of the individual arising from
a distribution described in subparagraph (C)(ii). In determining the amount of
such distribution, proper adjustments shall be made for liabilities of the
trust allocable to an individual’s share in the trust.</continuation-text></paragraph><paragraph id="ID020636DAFF7A4D38877DABC8E8012AC5"><enum>(2)</enum><header>Special rules
for interests in qualified trusts</header>
<subparagraph id="ID9B36168C3126403CBE34804379E32DD2"><enum>(A)</enum><header>In
general</header><text>If the trust interest described in paragraph (1) is an
interest in a qualified trust—</text>
<clause id="ID7083830C60304252973D47C52B0AB69A"><enum>(i)</enum><text>paragraph (1) and
subsection (a) shall not apply, and</text>
</clause><clause id="ID58DF8DF0E49E489DAC0C7F405F7D6A93"><enum>(ii)</enum><text>in addition to
any other tax imposed by this title, there is hereby imposed on each
distribution with respect to such interest a tax in the amount determined under
subparagraph (B).</text>
</clause></subparagraph><subparagraph id="ID9101F317742646908C6C4FCEC61D3343"><enum>(B)</enum><header>Amount of
tax</header><text>The amount of tax under subparagraph (A)(ii) shall be equal
to the lesser of—</text>
<clause id="ID4DFC02DFE99F41F0A52077D54ABFD68B"><enum>(i)</enum><text>the highest rate
of tax imposed by section 1(e) for the taxable year which includes the day
before the expatriation date, multiplied by the amount of the distribution,
or</text>
</clause><clause id="ID01CB1C01DF7A45BFBED92C599B5844E2"><enum>(ii)</enum><text>the balance in
the deferred tax account immediately before the distribution determined without
regard to any increases under subparagraph (C)(ii) after the 30th day preceding
the distribution.</text>
</clause></subparagraph><subparagraph id="ID99C3AF4B3C464F678B1868C4143B4D11"><enum>(C)</enum><header>Deferred tax
account</header><text>For purposes of subparagraph (B)(ii)—</text>
<clause id="ID7D0C2A062E8F426384C577881C782D3C"><enum>(i)</enum><header>Opening
balance</header><text>The opening balance in a deferred tax account with
respect to any trust interest is an amount equal to the tax which would have
been imposed on the allocable expatriation gain with respect to the trust
interest if such gain had been included in gross income under subsection
(a).</text>
</clause><clause id="ID5FF66795073F472784440F6AAD8B8103"><enum>(ii)</enum><header>Increase for
interest</header><text>The balance in the deferred tax account shall be
increased by the amount of interest determined (on the balance in the account
at the time the interest accrues), for periods after the 90th day after the
expatriation date, by using the rates and method applicable under section 6621
for underpayments of tax for such periods, except that section 6621(a)(2) shall
be applied by substituting <quote>5 percentage points</quote> for <quote>3
percentage points</quote> in subparagraph (B) thereof.</text>
</clause><clause id="ID51EE37F74178440BB7A3310F72E6E177"><enum>(iii)</enum><header>Decrease for
taxes previously paid</header><text>The balance in the tax deferred account
shall be reduced—</text>
<subclause id="IDEA6EF6E0E3B74542AFD8906167AD2DEC"><enum>(I)</enum><text>by the amount of
taxes imposed by subparagraph (A) on any distribution to the person holding the
trust interest, and</text>
</subclause><subclause id="IDE1410F6B56894629B554C7D645D54724"><enum>(II)</enum><text>in the case of a
person holding a nonvested interest, to the extent provided in regulations, by
the amount of taxes imposed by subparagraph (A) on distributions from the trust
with respect to nonvested interests not held by such person.</text>
</subclause></clause></subparagraph><subparagraph id="ID0AC95441E71F4AEBBB1F2880E5A454F6"><enum>(D)</enum><header>Allocable
expatriation gain</header><text>For purposes of this paragraph, the allocable
expatriation gain with respect to any beneficiary’s interest in a trust is the
amount of gain which would be allocable to such beneficiary’s vested and
nonvested interests in the trust if the beneficiary held directly all assets
allocable to such interests.</text>
</subparagraph><subparagraph id="ID3503EA0857274C34974A90337781CB25"><enum>(E)</enum><header>Tax deducted
and withheld</header>
<clause id="IDAA1AD9E0CCD84A25A0350CEF086D93CB"><enum>(i)</enum><header>In
general</header><text>The tax imposed by subparagraph (A)(ii) shall be deducted
and withheld by the trustees from the distribution to which it relates.</text>
</clause><clause id="IDFA1CF33319BF45C1B934BAE580781093"><enum>(ii)</enum><header>Exception
where failure to waive treaty rights</header><text>If an amount may not be
deducted and withheld under clause (i) by reason of the distributee failing to
waive any treaty right with respect to such distribution—</text>
<subclause id="ID5197738240684A6E948B9A4CD009FB01"><enum>(I)</enum><text>the tax imposed
by subparagraph (A)(ii) shall be imposed on the trust and each trustee shall be
personally liable for the amount of such tax, and</text>
</subclause><subclause id="IDF03B14ACB9DE4272B66E2AD2193A1DE8"><enum>(II)</enum><text>any other
beneficiary of the trust shall be entitled to recover from the distributee the
amount of such tax imposed on the other beneficiary.</text>
</subclause></clause></subparagraph><subparagraph id="ID1E6288E9F1DF4DFD9C8A554821E2F45B"><enum>(F)</enum><header>Disposition</header><text>If
a trust ceases to be a qualified trust at any time, a covered expatriate
disposes of an interest in a qualified trust, or a covered expatriate holding
an interest in a qualified trust dies, then, in lieu of the tax imposed by
subparagraph (A)(ii), there is hereby imposed a tax equal to the lesser
of—</text>
<clause id="ID66B50BBE591549EC94CCF311300DB659"><enum>(i)</enum><text>the tax
determined under paragraph (1) as if the day before the expatriation date were
the date of such cessation, disposition, or death, whichever is applicable,
or</text>
</clause><clause id="ID99A72CFAE018460B9983ADC1824B8646"><enum>(ii)</enum><text>the balance in
the tax deferred account immediately before such date.</text>
</clause><continuation-text continuation-text-level="subparagraph">Such
tax shall be imposed on the trust and each trustee shall be personally liable
for the amount of such tax and any other beneficiary of the trust shall be
entitled to recover from the covered expatriate or the estate the amount of
such tax imposed on the other beneficiary.</continuation-text></subparagraph><subparagraph id="ID74431242C8724140A40E3A181F6658C7"><enum>(G)</enum><header>Definitions and
special rules</header><text>For purposes of this paragraph—</text>
<clause id="ID3C578B8261204D5990EF688E5E7FD27B"><enum>(i)</enum><header>Qualified
trust</header><text>The term <term>qualified trust</term> means a trust which
is described in section 7701(a)(30)(E).</text>
</clause><clause id="ID93B514DD5A024CFC9401B4FB6391065C"><enum>(ii)</enum><header>Vested
interest</header><text>The term <term>vested interest</term> means any interest
which, as of the day before the expatriation date, is vested in the
beneficiary.</text>
</clause><clause id="ID848983B21802459EB3CDF5C28EAB9503"><enum>(iii)</enum><header>Nonvested
interest</header><text>The term <term>nonvested interest</term> means, with
respect to any beneficiary, any interest in a trust which is not a vested
interest. Such interest shall be determined by assuming the maximum exercise of
discretion in favor of the beneficiary and the occurrence of all contingencies
in favor of the beneficiary.</text>
</clause><clause id="IDF32CDED99507479D8A8D54DBEEFF6F14"><enum>(iv)</enum><header>Adjustments</header><text>The
Secretary may provide for such adjustments to the bases of assets in a trust or
a deferred tax account, and the timing of such adjustments, in order to ensure
that gain is taxed only once.</text>
</clause><clause id="IDB2C0201439F045FCB19805ABB0F7089C"><enum>(v)</enum><header>Coordination
with retirement plan rules</header><text>This subsection shall not apply to an
interest in a trust which is part of a retirement plan to which subsection
(d)(2) applies.</text>
</clause></subparagraph></paragraph><paragraph id="ID8850387CE51C4A5FAAC825749501D400"><enum>(3)</enum><header>Determination
of beneficiaries’ interest in trust</header>
<subparagraph id="IDF69DAD98760145DCA22498594C394A1F"><enum>(A)</enum><header>Determinations
under paragraph <enum-in-header>(1)</enum-in-header></header><text>For purposes
of paragraph (1), a beneficiary’s interest in a trust shall be based upon all
relevant facts and circumstances, including the terms of the trust instrument
and any letter of wishes or similar document, historical patterns of trust
distributions, and the existence of and functions performed by a trust
protector or any similar adviser.</text>
</subparagraph><subparagraph id="ID8E060643C6144AA5AE9F1A36358CC530"><enum>(B)</enum><header>Other
determinations</header><text>For purposes of this section—</text>
<clause id="ID24636F1D8C0F40E2B5B73A9F0A16A9D2"><enum>(i)</enum><header>Constructive
ownership</header><text>If a beneficiary of a trust is a corporation,
partnership, trust, or estate, the shareholders, partners, or beneficiaries
shall be deemed to be the trust beneficiaries for purposes of this
section.</text>
</clause><clause id="ID7B08F4AEF45C4C669CA0426F1FA8B984"><enum>(ii)</enum><header>Taxpayer
return position</header><text>A taxpayer shall clearly indicate on its income
tax return—</text>
<subclause id="ID657C4640FCC0421EB88B7D8887404030"><enum>(I)</enum><text>the methodology
used to determine that taxpayer’s trust interest under this section, and</text>
</subclause><subclause id="IDEB8D518CBC684EAA95AD94A1D960BA42"><enum>(II)</enum><text>if the taxpayer
knows (or has reason to know) that any other beneficiary of such trust is using
a different methodology to determine such beneficiary’s trust interest under
this section.</text>
</subclause></clause></subparagraph></paragraph></subsection><subsection id="ID74A432BC23914923A0296EF179705251"><enum>(g)</enum><header>Termination of
deferrals, etc</header><text>In the case of any covered expatriate,
notwithstanding any other provision of this title—</text>
<paragraph id="ID9CFCFFF8DCA641DDB87D47606566F378"><enum>(1)</enum><text>any period during
which recognition of income or gain is deferred shall terminate on the day
before the expatriation date, and</text>
</paragraph><paragraph id="ID0640D0AD495B4DF0A4553DB846E2185C"><enum>(2)</enum><text>any extension of
time for payment of tax shall cease to apply on the day before the expatriation
date and the unpaid portion of such tax shall be due and payable at the time
and in the manner prescribed by the Secretary.</text>
</paragraph></subsection><subsection id="ID163CD8E0954641F5A256E99D14474725"><enum>(h)</enum><header>Imposition of
tentative tax</header>
<paragraph id="ID037BD6C29E44436497FBC65B265A740B"><enum>(1)</enum><header>In
general</header><text>If an individual is required to include any amount in
gross income under subsection (a) for any taxable year, there is hereby
imposed, immediately before the expatriation date, a tax in an amount equal to
the amount of tax which would be imposed if the taxable year were a short
taxable year ending on the expatriation date.</text>
</paragraph><paragraph id="ID7E0F9642F4BC48B2928FCEF85FAE80B6"><enum>(2)</enum><header>Due
date</header><text>The due date for any tax imposed by paragraph (1) shall be
the 90th day after the expatriation date.</text>
</paragraph><paragraph id="IDD5B250EACF5C428FB00B0D4815D5A3EE"><enum>(3)</enum><header>Treatment of
tax</header><text>Any tax paid under paragraph (1) shall be treated as a
payment of the tax imposed by this chapter for the taxable year to which
subsection (a) applies.</text>
</paragraph><paragraph id="ID5BD72DBB8D744B9293F3E8EAA79704A1"><enum>(4)</enum><header>Deferral of
tax</header><text>The provisions of subsection (b) shall apply to the tax
imposed by this subsection to the extent attributable to gain includible in
gross income by reason of this section.</text>
</paragraph></subsection><subsection id="IDE02663CAE3A14088A62764003DD36FCC"><enum>(i)</enum><header>Special liens
for deferred tax amounts</header>
<paragraph id="ID567C2C1BBA2C4398AC38FD736F64BC2E"><enum>(1)</enum><header>Imposition of
lien</header>
<subparagraph id="ID2999A03A67464A7D8A96CC402D9655B8"><enum>(A)</enum><header>In
general</header><text>If a covered expatriate makes an election under
subsection (a)(4) or (b) which results in the deferral of any tax imposed by
reason of subsection (a), the deferred amount (including any interest,
additional amount, addition to tax, assessable penalty, and costs attributable
to the deferred amount) shall be a lien in favor of the United States on all
property of the expatriate located in the United States (without regard to
whether this section applies to the property).</text>
</subparagraph><subparagraph id="ID3D66C0D6851D46B4B3FF5AD6CCBFB8B7"><enum>(B)</enum><header>Deferred
amount</header><text>For purposes of this subsection, the deferred amount is
the amount of the increase in the covered expatriate’s income tax which, but
for the election under subsection (a)(4) or (b), would have occurred by reason
of this section for the taxable year including the expatriation date.</text>
</subparagraph></paragraph><paragraph id="ID7548EB76A4B446EBBF3A745876929A33"><enum>(2)</enum><header>Period of
lien</header><text>The lien imposed by this subsection shall arise on the
expatriation date and continue until—</text>
<subparagraph id="ID405B35576C3240B7867BD9B92C637688"><enum>(A)</enum><text>the liability for
tax by reason of this section is satisfied or has become unenforceable by
reason of lapse of time, or</text>
</subparagraph><subparagraph id="ID2C78F6E09F1E43B093BD1505F411B6DC"><enum>(B)</enum><text>it is established
to the satisfaction of the Secretary that no further tax liability may arise by
reason of this section.</text>
</subparagraph></paragraph><paragraph id="IDA2CB615553B34EF0A509D7EBE8BB6DD4"><enum>(3)</enum><header>Certain rules
apply</header><text>The rules set forth in paragraphs (1), (3), and (4) of
section 6324A(d) shall apply with respect to the lien imposed by this
subsection as if it were a lien imposed by section 6324A.</text>
</paragraph></subsection><subsection id="ID0B315149BFE44D138941DC2678940C9C"><enum>(j)</enum><header>Regulations</header><text>The
Secretary shall prescribe such regulations as may be necessary or appropriate
to carry out the purposes of this
section.</text>
</subsection></section><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="IDE0EAB150E24B4AF3841FB7E1142A8FD5"><enum>(b)</enum><header>Inclusion in
income of gifts and bequests received by United States citizens and residents
from expatriates</header><text>Section 102 (relating to gifts, etc. not
included in gross income) is amended by adding at the end the following new
subsection:</text>
<quoted-block id="ID9CAFF3C28F8B44CCBD198A39B551F616" style="OLC">
<subsection id="IDED6F276281E847838DC7C0E13082DC0D"><enum>(d)</enum><header>Gifts and
inheritances from covered expatriates</header>
<paragraph id="IDDF06088836434A2D840883ACE04E20D6"><enum>(1)</enum><header>In
general</header><text>Subsection (a) shall not exclude from gross income the
value of any property acquired by gift, bequest, devise, or inheritance from a
covered expatriate after the expatriation date. For purposes of this
subsection, any term used in this subsection which is also used in section 877A
shall have the same meaning as when used in section 877A.</text>
</paragraph><paragraph id="IDD280F785475C4C77815DA3B1A7CE8C54"><enum>(2)</enum><header>Exceptions for
transfers otherwise subject to estate or gift tax</header><text>Paragraph (1)
shall not apply to any property if either—</text>
<subparagraph id="ID6ABA64A9999E4C74AAD3AB48637530CA"><enum>(A)</enum><text>the gift,
bequest, devise, or inheritance is—</text>
<clause id="IDDC0F6C4C2D604DF8BD98B96C8E104882"><enum>(i)</enum><text>shown on a timely
filed return of tax imposed by chapter 12 as a taxable gift by the covered
expatriate, or</text>
</clause><clause id="ID8E399A6CF7D5437C918EB7E624F19354"><enum>(ii)</enum><text>included in the
gross estate of the covered expatriate for purposes of chapter 11 and shown on
a timely filed return of tax imposed by chapter 11 of the estate of the covered
expatriate, or</text>
</clause></subparagraph><subparagraph id="ID21BDE71D75A14A839FAD0D4A540C4726"><enum>(B)</enum><text>no such return
was timely filed but no such return would have been required to be filed even
if the covered expatriate were a citizen or long-term resident of the United
States.</text>
</subparagraph></paragraph></subsection><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="IDA5D8CDDFED60415FB1164DC722AD10E6"><enum>(c)</enum><header>Definition of
termination of United States citizenship</header><text>Section 7701(a) is
amended by adding at the end the following new paragraph:</text>
<quoted-block id="ID839F8FFD84FD4B298CDF64CDC6204E07" style="OLC">
<paragraph id="ID6A3598B12BAF430A9A42DA932C4D1186"><enum>(49)</enum><header>Termination of
united states citizenship</header>
<subparagraph id="ID8CD14CB72A2D4A9B90931C54FA3C8071"><enum>(A)</enum><header>In
general</header><text>An individual shall not cease to be treated as a United
States citizen before the date on which the individual’s citizenship is treated
as relinquished under section 877A(e)(3).</text>
</subparagraph><subparagraph id="ID7FC5AB0792B54AD2B74263075EF15FAA"><enum>(B)</enum><header>Dual
citizens</header><text>Under regulations prescribed by the Secretary,
subparagraph (A) shall not apply to an individual who became at birth a citizen
of the United States and a citizen of another
country.</text>
</subparagraph></paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="IDA350C7AA10A542D486996955F07205A7"><enum>(d)</enum><header>Ineligibility
for visa or admission to United States</header>
<paragraph id="ID35832B94C55F4769905BB6537A02DA1D"><enum>(1)</enum><header>In
general</header><text>Section 212(a)(10)(E) of the
<act-name parsable-cite="INA">Immigration and Nationality Act</act-name> (8
U.S.C. 1182(a)(10)(E)) is amended to read as follows:</text>
<quoted-block act-name="Immigration and Nationality Act" id="ID9FA846DF614F4ADDB4A01187F41C0EF5" style="OLC">
<subparagraph id="IDD9081DBC10934A4BAF76EBD87CA9B302"><enum>(E)</enum><header>Former citizens
not in compliance with expatriation revenue provisions</header><text>Any alien
who is a former citizen of the United States who relinquishes United States
citizenship (within the meaning of section 877A(e)(3) of the Internal Revenue
Code of 1986) and who is not in compliance with section 877A of such Code
(relating to expatriation) is
inadmissible.</text>
</subparagraph><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph><paragraph id="ID9F22CDB97FD544459CF1E9583B4D4D3A"><enum>(2)</enum><header>Availability of
information</header>
<subparagraph id="IDE5AA3B59FC234285A30CB71DAD0E0898"><enum>(A)</enum><header>In
general</header><text>Section 6103(l) (relating to disclosure of returns and
return information for purposes other than tax administration) is amended by
adding at the end the following new paragraph:</text>
<quoted-block id="IDC6A6D4047F24432292B6B1C420E08686" style="OLC">
<paragraph id="IDD06C131F214C434EB1F841DA745739FA"><enum>(21)</enum><header>Disclosure to
deny visa or admission to certain expatriates</header><text>Upon written
request of the Attorney General or the Attorney General’s delegate, the
Secretary shall disclose whether an individual is in compliance with section
877A (and if not in compliance, any items of noncompliance) to officers and
employees of the Federal agency responsible for administering section
212(a)(10)(E) of the <act-name parsable-cite="INA">Immigration and Nationality
Act</act-name> solely for the purpose of, and to the extent necessary in,
administering such section
212(a)(10)(E).</text>
</paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subparagraph><subparagraph id="ID20E78852A9D64FB5AB9B8A147CE96BEC"><enum>(B)</enum><header>Safeguards</header><text>Section
6103(p)(4) (relating to safeguards) is amended by striking <quote>or
(20)</quote> each place it appears and inserting <quote>(20), or
(21)</quote>.</text>
</subparagraph></paragraph><paragraph id="IDD4917564D68948A491CA1164878EF7D2"><enum>(3)</enum><header>Effective
dates</header><text>The amendments made by this subsection shall apply to
individuals who relinquish United States citizenship on or after the date of
the enactment of this Act.</text>
</paragraph></subsection><subsection id="ID062CF1A2DC1045B7A68A93371DC6F659"><enum>(e)</enum><header>Conforming
amendments</header>
<paragraph id="ID0D6394C048F14D9A8408AFA5D2A43784"><enum>(1)</enum><text>Section 877 is
amended by adding at the end the following new subsection:</text>
<quoted-block id="IDEE294802F9FD41C89DC043EBCC4C6ACE" style="OLC">
<subsection id="ID868BB8E008EB47198101710C0BBAC072"><enum>(h)</enum><header>Application</header><text>This
section shall not apply to an expatriate (as defined in section 877A(e)) whose
expatriation date (as so defined) occurs on or after the date of the enactment
of this
subsection.</text>
</subsection><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph><paragraph id="IDB199B492772B413DAC0BD6C5A22888D1"><enum>(2)</enum><text>Section 2107 is
amended by adding at the end the following new subsection:</text>
<quoted-block id="ID70E7C77F728E4C42ADBCCF332898D55D" style="OLC">
<subsection id="ID9BE8DE2C7C6B482E87CA5E167090DC0C"><enum>(f)</enum><header>Application</header><text>This
section shall not apply to any expatriate subject to section
877A.</text>
</subsection><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph><paragraph id="ID2533559384814AD18030A3F4057E261D"><enum>(3)</enum><text>Section
2501(a)(3) is amended by adding at the end the following new
subparagraph:</text>
<quoted-block id="IDCA288E5486C9469C92F79B64100B80BC" style="OLC">
<subparagraph id="IDB60C25FCE7794CE7B0FBE1BC95F6990D"><enum>(C)</enum><header>Application</header><text>This
paragraph shall not apply to any expatriate subject to section
877A.</text>
</subparagraph><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph><paragraph id="idD8D043BEA0474613BB5EA174E0A4E2D1"><enum>(4)</enum><text>Section 6039G(a)
is amended by inserting <quote>or 877A</quote> after <quote>section
877(b)</quote>.</text>
</paragraph><paragraph id="id9B0062A6D2F54C6E98863B87B31DF24B"><enum>(5)</enum><text>The second
sentence of section 6039G(d) is amended by inserting <quote>or who relinquishes
United States citizenship (within the meaning of section 877A(e)(3))</quote>
after <quote>section 877(a))</quote>.</text>
</paragraph></subsection><subsection id="IDFED77E0B51EA44E883CDCD07D1B26541"><enum>(f)</enum><header>Clerical
amendment</header><text>The table of sections for subpart A of part II of
subchapter N of chapter 1 is amended by inserting after the item relating to
section 877 the following new item:</text>
<quoted-block id="ID680871A262A4410389B1EA583D1D55B6" style="OLC">
<toc regeneration="no-regeneration">
<toc-entry level="section">Sec. 877A. Tax responsibilities of
expatriation.</toc-entry>
</toc>
<after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="ID2A9F569E1BF74F7B8DDB52CFF890630B"><enum>(g)</enum><header>Effective
date</header>
<paragraph id="ID740553117A53429CBE0487128680CA44"><enum>(1)</enum><header>In
general</header><text>Except as provided in this subsection, the amendments
made by this section shall apply to expatriates (within the meaning of section
877A(e) of the Internal Revenue Code of 1986, as added by this section) whose
expatriation date (as so defined) occurs on or after the date of the enactment
of this Act.</text>
</paragraph><paragraph id="ID8CA140199E4D4A77A56B9667358BDC51"><enum>(2)</enum><header>Gifts and
bequests</header><text>Section 102(d) of the Internal Revenue Code of 1986 (as
added by subsection (b)) shall apply to gifts and bequests received on or after
the date of the enactment of this Act, from an individual or the estate of an
individual whose expatriation date (as so defined) occurs after such
date.</text>
</paragraph><paragraph commented="no" display-inline="no-display-inline" id="ID142CDA6B57A24B2684EB10DFFF5BBABF"><enum>(3)</enum><header>Due date for
tentative tax</header><text>The due date under section 877A(h)(2) of the
Internal Revenue Code of 1986, as added by this section, shall in no event
occur before the 90th day after the date of the enactment of this Act.</text>
</paragraph></subsection></section></subtitle><subtitle id="IDE2A4BFE7E16C4FBEB526454B6C4BADD2"><enum>F</enum><header>Miscellaneous
provisions</header>
<section id="ID4F46C649066246F6B0A2AAF0180C464A"><enum>551.</enum><header>Treatment of
contingent payment convertible debt instruments</header>
<subsection id="ID0EE68BE3A5AB4E759CCB420893BDA99C"><enum>(a)</enum><header>In
general</header><text>Section 1275(d) (relating to regulation authority) is
amended—</text>
<paragraph id="IDB0F5A979B0B349D189725D17C21BF781"><enum>(1)</enum><text>by striking
<quote>The Secretary</quote> and inserting the following:</text>
<quoted-block id="ID604744223156423CB7C1218910942F40" style="OLC">
<paragraph id="IDD6E001FEC87748B287EA0A403814207A"><enum>(1)</enum><header>In
general</header><text>The Secretary</text>
</paragraph><after-quoted-block>,
and</after-quoted-block></quoted-block>
</paragraph><paragraph id="ID633DF5BC0DC840FC9441A077EC9E17B8"><enum>(2)</enum><text>by adding at the
end the following new paragraph:</text>
<quoted-block id="IDE40F8431D8F542C5B00A1A6B25501D7C" style="OLC">
<paragraph id="ID42DF1F88978C46AAA92DC16470487339"><enum>(2)</enum><header>Treatment of
contingent payment convertible debt</header>
<subparagraph id="ID41A151D74C954CE2B832152CEF6A05D0"><enum>(A)</enum><header>In
general</header><text>In the case of a debt instrument which—</text>
<clause id="IDFBD864361BB24440872C0711F6DB98F1"><enum>(i)</enum><text>is convertible
into stock of the issuing corporation, into stock or debt of a related party
(within the meaning of section 267(b) or 707(b)(1)), or into cash or other
property in an amount equal to the approximate value of such stock or debt,
and</text>
</clause><clause id="ID3C05F4E0F4B74B068957F1736A06165B"><enum>(ii)</enum><text>provides for
contingent payments,</text>
</clause><continuation-text continuation-text-level="subparagraph">any
regulations which require original issue discount to be determined by reference
to the comparable yield of a noncontingent fixed-rate debt instrument shall be
applied as if the regulations require that such comparable yield be determined
by reference to a noncontingent fixed-rate debt instrument which is convertible
into stock.</continuation-text></subparagraph><subparagraph id="ID7136A4456BD545FFA651559E9F888477"><enum>(B)</enum><header>Special
rule</header><text>For purposes of subparagraph (A), the comparable yield shall
be determined without taking into account the yield resulting from the
conversion of a debt instrument into
stock.</text>
</subparagraph></paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph></subsection><subsection id="IDA1925DFDBC754B5D819EE024F16D476C"><enum>(b)</enum><header>Cross
reference</header><text>Section 163(e)(6) (relating to cross references) is
amended by adding at the end the following:</text>
<quoted-block id="IDC65BD72CCE1B4932B97A10441073FA41" style="OLC">
<subparagraph id="ID0C649D31D3A7456ABD6D20FAAD958314"><enum></enum><text>For the
treatment of contingent payment convertible debt, see section
1275(d)(2).</text>
</subparagraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="ID0218DAF16D8C4DE8B11735461D77AEB3"><enum>(c)</enum><header>Effective
date</header><text>The amendments made by this section shall apply to debt
instruments issued on or after the date of the enactment of this Act.</text>
</subsection></section><section id="ID50F7F37A2A0F470DA7FED404ACDE615E"><enum>552.</enum><header>Grant of
Treasury regulatory authority to address foreign tax credit transactions
involving inappropriate separation of foreign taxes from related foreign
income</header>
<subsection id="ID344285EC0AA843229731B1A6C57DBDE1"><enum>(a)</enum><header>In
general</header><text>Section 901 (relating to taxes of foreign countries and
of possessions of United States) is amended by redesignating subsection (m) as
subsection (n) and by inserting after subsection (l) the following new
subsection:</text>
<quoted-block id="ID7BCF214B0E1343EB8B7FDF501315D0E7" style="OLC">
<subsection id="IDCE7AA906CEFA4631905F5EC248CF2600"><enum>(m)</enum><header>Regulations</header><text>The
Secretary may prescribe regulations disallowing a credit under subsection (a)
for all or a portion of any foreign tax, or allocating a foreign tax among 2 or
more persons, in cases where the foreign tax is imposed on any person in
respect of income of another person or in other cases involving the
inappropriate separation of the foreign tax from the related foreign
income.</text>
</subsection><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="ID199EE27F15F647A8A4E6EF4B2FE8905A"><enum>(b)</enum><header>Effective
date</header><text>The amendments made by this section shall apply to
transactions entered into after the date of the enactment of this Act.</text>
</subsection></section><section id="ID2C86B8A488014D27B966FBACCDCF2EF3"><enum>553.</enum><header>Repeal of
special property exception to leasing provisions of the American Jobs Creation
Act of 2004</header>
<subsection id="ID1844396F47B245B6A77CE55026670151"><enum>(a)</enum><header>In
general</header><text>Section 849(b) of the American Jobs Creation Act of 2004
is amended by striking paragraphs (1) and (2), by redesignating paragraphs (3)
and (4) as paragraphs (1) and (2), respectively.</text>
</subsection><subsection id="IDD9E5F1B36D674349B537B1CE3271840C"><enum>(b)</enum><header>Effective
date</header><text>The amendments made by this section shall take effect as if
included in the enactment of the American Jobs Creation Act of 2004.</text>
</subsection></section><section id="idA98F00B8116F4A0C898CEBC1B3591952"><enum>554.</enum><header>Application of
earnings stripping rules to partners which are corporations</header>
<subsection id="id34D04A4F8DF64E079FF568703DEAB30F"><enum>(a)</enum><header>In
general</header><text>Section 163(j) (relating to limitation on deduction for
interest on certain indebtedness) is amended by redesignating paragraph (8) as
paragraph (9) and by inserting after paragraph (7) the following new
paragraph:</text>
<quoted-block display-inline="no-display-inline" id="id409B6C7D981C4DEF8387012FFF8F2F2D" style="OLC">
<paragraph id="idA0AB64E100084B2D90411F14F81CA805"><enum>(8)</enum><header>Treatment of
corporate partners</header><text>Except to the extent provided by regulations,
in applying this subsection to a corporation which owns (directly or
indirectly) an interest in a partnership—</text>
<subparagraph id="idFFDA0B58837744EE9098AAF73AF5F770"><enum>(A)</enum><text>such
corporation's distributive share of interest income paid or accrued to such
partnership shall be treated as interest income paid or accrued to such
corporation,</text>
</subparagraph><subparagraph id="idBFBF13D5B90349BEB4C594E7AB15F5A7"><enum>(B)</enum><text>such
corporation's distributive share of interest paid or accrued by such
partnership shall be treated as interest paid or accrued by such corporation,
and</text>
</subparagraph><subparagraph id="idF5CEBEA35F884D32A8215866556C1DA7"><enum>(C)</enum><text>such
corporation's share of the liabilities of such partnership shall be treated as
liabilities of such
corporation.</text>
</subparagraph></paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="id8026135E1C9241DB81605A6C95CC5B4C"><enum>(b)</enum><header>Additional
regulatory authority</header><text>Section 163(j)(9) (relating to regulations),
as redesignated by subsection (a), is amended by striking <quote>and</quote> at
the end of subparagraph (B), by striking the period at the end of subparagraph
(C) and inserting <quote>, and</quote>, and by adding at the end the following
new subparagraph:</text>
<quoted-block display-inline="no-display-inline" id="id49162B14B9A94AB78045046A9289C71E" style="OLC">
<subparagraph id="idD0E91C4C51D943BDA8BACF09DFA5B89E"><enum>(D)</enum><text>regulations
providing for the reallocation of shares of partnership indebtedness, or
distributive shares of the partnership's interest income or interest expense,
as may be appropriate to carry out the purposes of this
subsection.</text>
</subparagraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection commented="no" display-inline="no-display-inline" id="id19B68E95B2604F76AFC0E02C3EDDAFFE"><enum>(c)</enum><header>Effective
date</header><text>The amendments made by this section shall apply to taxable
years beginning on or after the date of the enactment of this Act.</text>
</subsection></section><section id="IDF0DDDE8AF81E434BBF54FCD2AAE6D71B"><enum>555.</enum><header>Limitation of
employer deduction for certain entertainment expenses</header>
<subsection id="ID3ABBFFEE765A49A8817708DE807AF79C"><enum>(a)</enum><header>In
general</header><text>Paragraph (2) of section 274(e) (relating to expenses
treated as compensation) is amended to read as follows:</text>
<quoted-block id="IDE8F99136DF8C4C92B4760C81A3A55111" style="OLC">
<paragraph id="IDBC7D7A68B971429FB75D0FFB580F9945"><enum>(2)</enum><header>Expenses
treated as compensation</header><text>Expenses for goods, services, and
facilities, to the extent that the expenses do not exceed the amount of the
expenses which are treated by the taxpayer, with respect to the recipient of
the entertainment, amusement, or recreation, as compensation to an employee on
the taxpayer’s return of tax under this chapter and as wages to such employee
for purposes of chapter 24 (relating to withholding of income tax at source on
wages).</text>
</paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="ID0CA191A37EF74A7F92565412CF34A1E9"><enum>(b)</enum><header>Persons not
employees</header><text>Paragraph (9) of section 274(e) is amended by striking
<quote>to the extent that the expenses are includible in the gross
income</quote> and inserting <quote>to the extent that the expenses do not
exceed the amount of the expenses which are includible in the gross
income</quote>.</text>
</subsection><subsection id="ID498D59144D8D407E83C04C53CB1C1718"><enum>(c)</enum><header>Effective
date</header><text>The amendments made by this section shall apply to expenses
incurred after the date of the enactment of this Act.</text>
</subsection></section><section id="IDBF7A66AF376E4973A7B28CC4142B42A7"><enum>556.</enum><header>Increase in
age of minor children whose unearned income is taxed as if parent’s
income</header>
<subsection id="IDE4B92B59A81D4D4FA9C6638AED857B0C"><enum>(a)</enum><header>In
general</header><text>Section 1(g)(2)(A) (relating to child to whom subsection
applies) is amended by striking <quote>age 14</quote> and inserting <quote>age
18</quote>.</text>
</subsection><subsection id="ID0AA84B8778844FAB9B99E600F30892A0"><enum>(b)</enum><header>Treatment of
distributions from qualified disability trusts</header><text>Section 1(g)(4)
(relating to net unearned income) is amended by adding at the end the following
new subparagraph:</text>
<quoted-block display-inline="no-display-inline" id="ID28606733F2164A1D844C85253B835247" style="OLC">
<subparagraph id="ID7D85815C4E8541EDA2490849956F39BD"><enum>(C)</enum><header>Treatment of
distributions from qualified disability trusts</header><text>For purposes of
this subsection, in the case of any child who is a beneficiary of a qualified
disability trust (as defined in section 642(b)(2)(C)(ii)), any amount included
in the income of such child under sections 652 and 662 during a taxable year
shall be considered earned income of such child for such taxable
year.</text>
</subparagraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="ID5E8C4C4D4077492C874999634F8FC5A0"><enum>(c)</enum><header>Effective
date</header><text>The amendments made by this section shall apply to taxable
years beginning after December 31, 2005.</text>
</subsection></section><section id="id0124ADAAB70B4D77946CCD727A72E88F"><enum>557.</enum><header>Loan and
redemption requirements on pooled financing requirements</header>
<subsection id="idA9207F418FE84A3382DAC7B5AF299809"><enum>(a)</enum><header>Strengthened
reasonable expectation requirement</header><text>Subparagraph (A) of section
149(f)(2) (relating to reasonable expectation requirement) is amended to read
as follows:</text>
<quoted-block display-inline="no-display-inline" id="id0C1762A40F584ADE85C986286E33CACE" style="OLC">
<subparagraph id="id7E001566CAE0478F94320DB09FD06405"><enum>(A)</enum><header>In
general</header><text>The requirements of this paragraph are met with respect
to an issue if the issuer reasonably expects that—</text>
<clause id="id80C416F2D89F403996659532D1A63085"><enum>(i)</enum><text>as of the close
of the 1-year period beginning on the date of issuance of the issue, at least
50 percent of the net proceeds of the issue (as of the close of such period)
will have been used directly or indirectly to make or finance loans to ultimate
borrowers, and</text>
</clause><clause id="id2D9D6CC745C04805834621CCC564BEE6"><enum>(ii)</enum><text>as of the close
of the 3-year period beginning on such date of issuance, at least 95 percent of
the net proceeds of the issue (as of the close of such period) will have been
so
used.</text>
</clause></subparagraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="idE3F56099AA15461B80E63D67A064EE11"><enum>(b)</enum><header>Written loan
commitment and redemption requirements</header><text>Section 149(f) (relating
to treatment of certain pooled financing bonds) is amended by redesignating
paragraphs (4) and (5) as paragraphs (6) and (7), respectively, and by
inserting after paragraph (3) the following new paragraphs:</text>
<quoted-block display-inline="no-display-inline" id="id1B4B606B351A48EEAB609B60F8C1D853" style="OLC">
<paragraph id="id4029D94B7D1146C1B7BDE8507958CB30"><enum>(4)</enum><header>Written loan
commitment requirement</header>
<subparagraph id="id45AF1371D7DA42CEBAEFBC5D7CD56E29"><enum>(A)</enum><header>In
general</header><text>The requirement of this paragraph is met with respect to
an issue if the issuer receives prior to issuance written loan commitments
identifying the ultimate potential borrowers of at least 50 percent of the net
proceeds of such issue.</text>
</subparagraph><subparagraph id="idE58B767881E845E693E8EEE758FF5C05"><enum>(B)</enum><header>Exception</header><text>Subparagraph
(A) shall not apply with respect to any issuer which is a State (or an integral
part of a State) issuing pooled financing bonds to make or finance loans to
subordinate governmental units of such State or to State-created entities
providing financing for water-infrastructure projects through the
federally-sponsored State revolving fund program.</text>
</subparagraph></paragraph><paragraph id="id87EDB2C91F534729A443242F7FC75361"><enum>(5)</enum><header>Redemption
requirement</header><text>The requirement of this paragraph is met if to the
extent that less than the percentage of the proceeds of an issue required to be
used under clause (i) or (ii) of paragraph (2)(A) is used by the close of the
period identified in such clause, the issuer uses an amount of proceeds equal
to the excess of—</text>
<subparagraph id="id56FD0C3F75D44E058CAEAB076F5C4CF0"><enum>(A)</enum><text>the amount
required to be used under such clause, over</text>
</subparagraph><subparagraph id="idCD8F7C59DF9A4346AA0C4668DE6D296F"><enum>(B)</enum><text>the amount
actually used by the close of such period,</text>
</subparagraph><continuation-text continuation-text-level="paragraph">to redeem
outstanding bonds within 90 days after the end of such
period.</continuation-text></paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="idFBEF480D6A11499BB0B1AE35B05DA59C"><enum>(c)</enum><header>Elimination of
disregard of pooled bonds in determining eligibility for small issuer exception
to arbitrage rebate</header><text>Section 148(f)(4)(D)(ii) (relating to
aggregation of issuers) is amended by striking subclause (II) and by
redesignating subclauses (III) and (IV) as subclauses (II) and (III),
respectively.</text>
</subsection><subsection id="id9D3023A072024F80B84E6804F7720EB4"><enum>(d)</enum><header>Conforming
amendments</header>
<paragraph id="idE3F44A64BC344F15B0BFEFE7DC43ABCF"><enum>(1)</enum><text>Section 149(f)(1)
is amended by striking <quote>paragraphs (2) and (3)</quote> and inserting
<quote>paragraphs (2), (3), (4), and (5)</quote>.</text>
</paragraph><paragraph id="idF63C8351CB334857A3556A6AF90DF4FF"><enum>(2)</enum><text>Section
149(f)(7)(B), as redesignated by subsection (b), is amended by striking
<quote>paragraph (4)(A)</quote> and inserting <quote>paragraph
(6)(A)</quote>.</text>
</paragraph><paragraph id="id5E76EF795F494A7A9313FA09C24994B7"><enum>(3)</enum><text>Section 54(l)(2)
is amended by striking <quote>section 149(f)(4)(A)</quote> and inserting
<quote>section 149(f)(6)(A)</quote>.</text>
</paragraph></subsection><subsection id="id23605B8FEA5B4CA7A9D575DE8DC8B942"><enum>(e)</enum><header>Effective
date</header><text>The amendments made by this section shall apply to bonds
issued after the date of the enactment of this Act.</text>
</subsection></section><section id="id733DB24C0D8647FCAD82C4FE46E46F7E"><enum>558.</enum><header>Reporting of
interest on tax-exempt bonds</header>
<subsection id="id1E46E81C749047CC9D99938CAC5A858E"><enum>(a)</enum><header>In
general</header><text>Section 6049(b)(2) (relating to exceptions) is amended by
striking subparagraph (B) and by redesignating subparagraphs (C) and (D) as
subparagraphs (B) and (C), respectively.</text>
</subsection><subsection id="idE164F206158244B9BF440704905D10D3"><enum>(b)</enum><header>Conforming
amendment</header><text>Section 6049(b)(2)(C), as redesignated by subsection
(a), is amended by striking <quote>subparagraph (C)</quote> and inserting
<quote>subparagraph (B)</quote>.</text>
</subsection><subsection commented="no" display-inline="no-display-inline" id="id7CCFA91EEF0E442A9F810098F66D3B8B"><enum>(c)</enum><header>Effective
date</header><text>The amendments made by this section shall apply to interest
earned after December 31, 2005.</text>
</subsection></section><section id="id7712F6B943014A4897E4EEB56F40592E"><enum>559.</enum><header>Modification
of credit for producing fuel from a nonconventional source</header>
<subsection id="id5928873BA2624AD5965CEA21CCEF35DD"><enum>(a)</enum><header>Taxable years
ending before 2006</header>
<paragraph id="idE628623622E54F9AA7C22A421DC0E87C"><enum>(1)</enum><header>Modification of
phaseout</header>
<subparagraph id="id8A67CAE1783143A0B51812F7078F06F3"><enum>(A)</enum><header>In
general</header><text>Section 29(b)(1)(A) is amended by inserting <quote>the
calendar year preceding</quote> before <quote>the calendar year</quote>.</text>
</subparagraph><subparagraph id="id911707CBB45B4662B21D2207EB9F7D75"><enum>(B)</enum><header>Conforming
amendments</header><text>Section 29(b)((2) is amended—</text>
<clause id="idD48640C6A4144F79B6FBC3B750A3E60F"><enum>(i)</enum><text>by
striking <quote>The</quote> and inserting <quote>With respect to any calendar
year, the</quote>, and</text>
</clause><clause id="id845DF2717D114469B3E3418FB93A6BAD"><enum>(ii)</enum><text>by
striking <quote>for the calendar year in which the sale occurs</quote> and
inserting <quote>for such calendar year</quote>.</text>
</clause></subparagraph></paragraph><paragraph id="id11410835033F48DAA60A5FB3A6121DB3"><enum>(2)</enum><header>No inflation
adjustment for the credit amount in 2005</header><text>Section 29(b)(2), as
amended by paragraph (1), is amended by adding at the end the following new
sentence: <quote>This paragraph shall not apply with respect to the $3 amount
in subsection (a) for calendar year 2005 and the amount in effect under
subsection (a) for sales in such calendar year shall be the amount which was in
effect for sales in calendar year 2004.</quote>.</text>
</paragraph></subsection><subsection id="idAE1B5F7C73364734AB67B3F7C3B84954"><enum>(b)</enum><header>Taxable years
ending after 2005</header>
<paragraph id="id09978968958B4FE3BD8FCA138E16D32A"><enum>(1)</enum><header>Modification of
phaseout</header>
<subparagraph id="id2D6950C0BF2E4DCAA5947B8BF56BD406"><enum>(A)</enum><header>In
general</header><text>Section 45K(b)(1)(A) is amended by inserting <quote>the
calendar year preceding</quote> before <quote>the calendar year</quote>.</text>
</subparagraph><subparagraph id="idEF2251A93F474E61AF5EB1267468C28F"><enum>(B)</enum><header>Conforming
amendments</header><text>Section 45K(b)((2) is amended—</text>
<clause id="id8B84F6227CF14FA3AC39EFC9AF9AFD28"><enum>(i)</enum><text>by
striking <quote>The</quote> and inserting <quote>With respect to any calendar
year, the</quote>, and</text>
</clause><clause id="id6665EFCB2FF142A59A405C850F3567FC"><enum>(ii)</enum><text>by
striking <quote>for the calendar year in which the sale occurs</quote> and
inserting <quote>for such calendar year</quote>.</text>
</clause></subparagraph></paragraph><paragraph id="id99D7FD920CBA4502A73AECD4A019AC0C"><enum>(2)</enum><header>No inflation
adjustment for the credit amount in 2005, 2006, and 2007</header><text>Section
45K(b)(2), as amended by paragraph (1), is amended by adding at the end the
following new sentence: <quote>This paragraph shall not apply with respect to
the $3 amount in subsection (a) for calendar years 2005, 2006, and 2007 and the
amount in effect under subsection (a) for sales in each such calendar year
shall be the amount which was in effect for sales in calendar year
2004.</quote>.</text>
</paragraph><paragraph id="id798114AE1AA14B79A12D0B3948F1C54A"><enum>(3)</enum><header>Treatment of
coke and coke gas</header>
<subparagraph id="idA21D4725360D400D94FB99121AAB0207"><enum>(A)</enum><header>Nonapplication
of phaseout</header><text>Section 45K(g)(2) is amended by adding at the end the
following new subparagraph:</text>
<quoted-block display-inline="no-display-inline" id="id78B2C81005F848D88D40A07CB07211F2" style="OLC">
<subparagraph id="id26093B18BF1C4B3B9599AD89872768A5"><enum>(D)</enum><header>Nonapplication
of phaseout</header><text>Subsection (b)(1) shall not
apply.</text>
</subparagraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subparagraph><subparagraph id="id6F7CE89DBBCB4ABD959A8DE89EE39BD0"><enum>(B)</enum><header>Application of
inflation adjustment </header><text>Section 45K(g)(2)(B) is amended by
inserting <quote>and the last sentence of subsection (b)(2) shall not
apply.</quote>.</text>
</subparagraph><subparagraph id="id7C93596B3D1C444AA845377E79491D77"><enum>(C)</enum><header>Clarification
of qualifying facility</header><text>Section 45K(g)(1) is amended by inserting
<quote>(other than from petroleum based products)</quote> after <quote>coke or
coke gas</quote>.</text>
</subparagraph></paragraph></subsection><subsection commented="no" display-inline="no-display-inline" id="idED0BC66A2A1E4484B3208A22290B93B2"><enum>(c)</enum><header>Effective
date</header><text>The amendments made by this section shall apply to fuel sold
after December 31, 2004.</text>
</subsection></section><section commented="no" display-inline="no-display-inline" id="id47CB892A65F5407B9FCEA84C11DE98A6"><enum>560.</enum><header>Modification
of individual estimated tax safe harbor</header>
<subsection commented="no" display-inline="no-display-inline" id="idB837980A7015424DB36BCD1BB7136E34"><enum>(a)</enum><header>In
general</header><text>The table contained in section 6654(d)(1)(C) is amended
by striking <quote>2002 or thereafter</quote> and inserting <quote>2002, 2003,
2004, or 2005</quote> and by adding at the end the following new items:</text>
<quoted-block display-inline="no-display-inline" id="idE06423BA8B934A069B3A09EB68411E7E" style="OLC">
<table align-to-level="section" frame="none" line-rules="no-gen" rule-weights="0.0.0.4.0.0" subformat="S6211" table-type="subformat-2-Flush-Hang-Box-Right-Col-Fig">
<tgroup cols="2"><colspec coldef="txt" colname="col1" colsep="0" colwidth="275" min-data-value="0"></colspec><colspec coldef="txt" colname="col2" colsep="0" colwidth="100" min-data-value="0"></colspec>
<thead>
<row><entry align="left" colname="I49" rowsep="0"><bold><?xm-replace_text {Table Head Entry}?></bold></entry><entry align="right" colname="I50" rowsep="0"><bold><?xm-replace_text {Table Head Entry}?></bold></entry>
</row>
</thead>
<tbody>
<row><entry align="left" colname="I15" rowsep="0" stub-definition="txt-ldr">2006</entry><entry align="right" colname="I07" rowsep="0">119.5</entry>
</row>
<row><entry align="left" colname="I15" rowsep="0" stub-definition="txt-ldr">2007 or thereafter</entry><entry align="right" colname="I07" rowsep="0">110</entry>
</row>
</tbody>
</tgroup></table>
<after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection commented="no" display-inline="no-display-inline" id="id09D15AD040C445E2A1181EED3EEF96DD"><enum>(b)</enum><header>Effective
date</header><text>The amendments made by this section shall apply with respect
to any installment payment for taxable years beginning after December 31,
2005.</text>
</subsection></section><section id="idFE73339802FE4A68A989CF02BC5B758D"><enum>561.</enum><header>Revaluation of
LIFO inventories of large integrated oil companies</header>
<subsection id="idA44754D2BDDA467CAD782E21E723E0D8"><enum>(a)</enum><header>General
rule</header><text>Notwithstanding any other provision of law, if a taxpayer is
an applicable integrated oil company for its last taxable year ending in
calendar year 2005, the taxpayer shall—</text>
<paragraph id="id871FF016B9EE4A1DBBABAEDECBE99775"><enum>(1)</enum><text>increase,
effective as of the close of such taxable year, the value of each historic LIFO
layer of inventories of crude oil, natural gas, or any other petroleum product
(within the meaning of section 4611) by the layer adjustment amount, and</text>
</paragraph><paragraph id="id127FA92EA9124EB786EBF5B130B297D4"><enum>(2)</enum><text>decrease its cost
of goods sold for such taxable year by the aggregate amount of the increases
under paragraph (1).</text>
</paragraph><continuation-text continuation-text-level="subsection">If the
aggregate amount of the increases under paragraph (1) exceed the taxpayer's
cost of goods sold for such taxable year, the taxpayer's gross income for such
taxable year shall be increased by the amount of such excess.</continuation-text></subsection><subsection id="id1F6D2FDC7ABE46D6845BC00628AA3AC6"><enum>(b)</enum><header>Layer
adjustment amount</header><text>For purposes of this section—</text>
<paragraph id="idEEE814D40D224F6490EC16C431F6B22A"><enum>(1)</enum><header>In
general</header><text>The term <term>layer adjustment amount</term> means, with
respect to any historic LIFO layer, the product of—</text>
<subparagraph id="idF13FC9D08B2D4889B8744083666A82EF"><enum>(A)</enum><text>$18.75,
and</text>
</subparagraph><subparagraph id="idB751303A0ADC465988A61038C01E8445"><enum>(B)</enum><text>the number of
barrels of crude oil (or in the case of natural gas or other petroleum
products, the number of barrel-of-oil equivalents) represented by the
layer.</text>
</subparagraph></paragraph><paragraph id="idB6A5C84C32B94CB8BE77BC8098912A19"><enum>(2)</enum><header>Barrel-of-oil
equivalent</header><text>The term <term>barrel-of-oil equivalent</term> has the
meaning given such term by section 29(d)(5) (as in effect before its
redesignation by the Energy Tax Incentives Act of 2005).</text>
</paragraph></subsection><subsection id="id723586EE10174895BACE7B352583184D"><enum>(c)</enum><header>Application of
requirement</header>
<paragraph id="id563C8702432848D99FB8130A53F26717"><enum>(1)</enum><header>No change in
method of accounting</header><text>Any adjustment required by this section
shall not be treated as a change in method of accounting.</text>
</paragraph><paragraph commented="no" id="id1EA795851D5C40C28D3985563960F6E9"><enum>(2)</enum><header>Underpayments
of estimated tax</header><text>No addition to the tax shall be made under
section 6655 of the Internal Revenue Code of 1986 (relating to failure by
corporation to pay estimated tax) with respect to any underpayment of an
installment required to be paid with respect to the taxable year described in
subsection (a) to the extent such underpayment was created or increased by this
section.</text>
</paragraph></subsection><subsection id="id17D6ADFFD3E747979149CDB295D442E3"><enum>(d)</enum><header>Applicable
integrated oil company</header><text>For purposes of this section, the term
<term>applicable integrated oil company</term> means an integrated oil company
(as defined in section 291(b)(4) of the Internal Revenue Code of 1986) which
had gross receipts in excess of $1,000,000,000 for its last taxable year ending
during calendar year 2005. For purposes of this subsection, all persons treated
as a single employer under subsections (a) and (b) of section 52 of the
Internal Revenue Code of 1986 shall be treated as 1 person and, in the case of
a short taxable year, the rule under section 448(c)(3)(B) shall apply.</text>
</subsection></section><section id="id4C4146091CA34C17A42F6E64C51334B0"><enum>562.</enum><header>Elimination of
amortization of geological and geophysical expenditures for major integrated
oil companies</header>
<subsection id="id30410DA3D0794C8D9D882DA5210F8C1B"><enum>(a)</enum><header>In
general</header><text>Section 167(h) is amended by adding at the end the
following new paragraph:</text>
<quoted-block display-inline="no-display-inline" id="id2EAE7B6BF36240CDB65CAE64545F0234" style="OLC">
<paragraph id="id5D506B3C80B24942BED8EF1363AF3DFB"><enum>(5)</enum><header>Nonapplication
to major integrated oil companies</header><text>This subsection shall not apply
with respect to any expenses paid or incurred for any taxable year by any
integrated oil company (as defined in section 291(b)(4)) which has an average
daily worldwide production of crude oil of at least 500,000 barrels for such
taxable
year.</text>
</paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="id6380187B813E466BBBF04EBA447D41FB"><enum>(b)</enum><header>Effective
date</header><text>The amendment made by this section shall take effect as if
included in the amendment made by section 1329(a) of the Energy Policy Act of
2005.</text>
</subsection></section></subtitle>
November 16, 2005
Read twice and placed on the calendar